UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


PARK'S 

Banking  Law  of  Georgia 

AS  AMENDED  1920 

with  the 

Trust  Company  and  State  Depository  Acts. 
ANNOTATED 


DIGEST  OF  DECISIONS 

of  the 

Supreme  Court  and  Court  of  Appeals  of  Georgia 

on 

Banks  and  Banking 


Opinions  of  the  General  Counsel 

of  the 

Georgia  Bankers'  Association 

1910-1920 


By 

ORVILLE  A.   PARK 
/// 

General  Counsel  of  the  Georgia  Bankers'  Association, 
Compiler  Park's  Annotated  Code  of  Georgia 


Atlanta 

THE  HARRISON  COMPANY 
1920 


Copyright,  1920 

By 
THE  HARRISON  COMPANY. 


rx 

x 


PREFACE. 

Having  been  intimately  connected  as  General  Counsel  of  the 
Georgia  Bankers'  Association  with  the  efforts  which  finally  cul- 
minated in  the  passage  of  the  Banking  Act  of  1919,  I  was  re- 
quested shortly  after  the  passage  of  the  Act  to  prepare  an  anno- 
tated and  indexed  copy,  noting  particularly  the  changes  in  the  law 
and  the  sources  from  which  the  various  sections  were  derived. 

I  determined  to  broaden  somewhat  the  scope  of  the  work  and 
to  include  the  Trust  Company  Act  with  its  several  amendments, 
the  law  creating  and  regulating  State  depositories,  and  a  few 
other  statutes  relating  to  banks.  As  comparatively  few  of  the  sec- 
tions of  the  new  Act  had  received  judicial  construction,  it  seemed 
best  to  make  a  separate  digest  of  the  decisions  of  the  Supreme 
Court  and  Court  of  Appeals  of  Georgia  on  banks  and  banking. 
This  digest  is  little  more  than  a  rearrangement  of  the  notes  in 
Park's  Annotated  Code  of  Georgia,  particularly  the  General  Note 
on  Banks  and  Banking. 

I  had  prepared  for  publication,  at  the  instance  of  the  Georgia 
Bankers'  Association,  the  manuscript  for  a  small  volume  of  opin- 
ions given  to  members  of  the  Association  on  questions  of  banking 
law,  negotiable  instruments  and  kindred  topics.  Having  decided 
to  annotate  the  banking  law  and  to  prepare  the  digest  of  decisions, 
it  was  thought  best  to  include  in  the  one  volume  the  banking  opin- 
ions, so  that  the  bankers  and  bank  attorneys  of  Georgia,  for  whose 
benefit  primarily  the  work  was  undertaken,  should  have  in  one 
volume  the  banking  law  of  Georgia  with  a  sort  of  textbook  on  the 
general  subject. 

Unexpected  delays  in  the  completion  of  the  manuscript  and  the 
printing  of  the  book  delayed  its  completion  until  shortly  before 
the  1920  session  of  the  General  Assembly.  A  bill  having  been  in- 
troduced early  in  the  session  at  the  instance  of  the  Legislative  Com- 
mittee of  the  Georgia  Bankers'  Association  to  amend  the  Banking 
Act  in  a  number  of  particulars,  it  was  deemed  wise  to  delay  the 
publication  until  the  fate  of  these  amendments  could  be  determined 
and  to  incorporate  in  the  book  such  changes  and  amendments  as 
might  be  adopted.  This  has  been  done. 


iv  PREFACE. 

Competent  critics  have  pronounced  the  Georgia  Banking  Act  of 
1919  one  of  the  most  complete  and  modern  adopted  so  far  by  any 
American  State.  The  new  Department  of  Banking  created  by  it 
has  been  functioning  successfully  and  satisfactorily  since  January 
1,  1920.  Like  all  new  machinery,  a  little  time  is  required  for  ad- 
justment. It  is  earnestly  hoped  that  this  volume  will  make  the 
law  more  readily  available  and  better  understood,  arid  therefore 
will  assist  to  some  small  extent  in  its  successful  operation. 

ORVILLE  A.  PARK. 

Mac  on,  Georgia,  August  20,  1920. 


ABBREVIATIONS  and  CITATIONS. 

/  or  Ga. — Georgia  Supreme  Court  Reports.  Thus  76/218  or 
76  Ga.,  218,  means  the  76th  volume  of  Georgia  Supreme 
Court  Reports,  page  218. 

App.  or  Ga.  App. — Georgia  Court  of  Appeals  Reports. 

Code  § — Refers  to  sections  of  Park's  Annotated  Code  of 
Georgia.  The  sections  in  this  Code  are  the  same  as  those 
of  the  Code  of  1910,  the  additional  sections  in  Park's  Code 
being  indicated  by  small  letters  in  parentheses  following 
the  number  of  the  sections. 

P.  C.— Vol.  6,  Park's  Annotated  Code,  the  Penal  Code.  Sec- 
tions in  this  Code  are  the  same  as  in  Vol.  2,  Code  of  1910. 

U.  S. — United  States  Supreme  Court  Reports,  official  edition. 

L.  Ed. — Lawyers'  Edition  United  States  Supreme  Court  Re- 
ports. 

S.  E. — Southeastern  Reporter. 

Fed. — Federal  Reporter. 

U.  S.  R.  S.— United  States  Revised  Statutes. 

U.  S.  Comp.  Stat.— United  States  Compiled  Statutes. 

References  to  the  New  York  Act  are  to  the  sections  of  that  Act 
as  found  in  Morgan  &  Parker's  New  York  Banking  Law,  4th  Ed., 
1919. 

References  to  the  Alabama  Law  are  to  the  official  publication  of 
the  Alabama  Banking  Act  of  1911  as  amended. 

The  usual  abbreviations  of  the  official  reports  of  the  several 
States,  of  the  National  Reporter  System,  and  of  the  several  series 
of  selected  cases,  are  used. 


CONTENTS. 

PART  I. 

PAGE 

Historical  Note,  ix 

Banking  Act  of  1919,  ,  1 

Trust  Company  Act,  1 14 

Act  Authorizing  Banks  to  Acquire  Trust  Company 

Powers,  121 

Act  Authorizing  National  Banks  to  Exercise  Trust 

Powers, 124 

State  Depository  Act, 124 

Act  Authorizing  County  Treasurers  to  Deposit  County 

Funds  in  State  Depositories, 134 

General  Tax  Act  As  Related  to  Banks,  135 

Powers  of  Foreign  Executors,  Administrators,  or 

Guardians  With  Respect  to  Dividends  and  Stock,  .  .  .  136 

Index  to  Statutes,  137 

PART  II. 

Digest  of  Decisions  of  Supreme  Court  and  Court  of  Ap- 
peals of  Georgia  on  Banks  and  Banking, 185 

PART  III. 

Opinions'of  the  General  Counsel,  Georgia  Bankers'  As- 
sociation,      221 


vii 


HISTORICAL  NOTE. 


Prior  to  the  amendment  of  the  Constitution  of  Georgia,  adopted 
in  1891,  conferring  upon  the  Secretary  of  State  the  power  to  grant 
charters  to  banking  companies,  banks  were  incorporated  under 
special  acts  of  the  Legislature;  these  special  charters  differing 
widely  as  to  the  powers  and  privileges  conferred  and  as  to  the 
limitations  and  liabilities  imposed. 

The  earlier  legislation  of  a  general  character  related,  in  large 
part,  to  bank  bills  and  the  powers  of  and  limitations  upon  banks 
as  banks  of  issue.  As  early,  however,  as  1832  an  act  was  passed 
requiring  banks  to  make  semiannual  returns  to  the  Governor,  giv- 
ing certain  information  as  to  their  condition.  This  act  was 
amended  in  1850,  and  as  so  amended  continued  to  be  practically 
the  only  general  measure  regulating  banks  until  1889,  when  the 
State  Treasurer  was  made  ex-officio  Bank  Examiner  and  required 
to  make  an  examination  of  all  banking  corporations  twice  each 
year.  The  Act  of  1894  substituted  for  the  semiannual  reports  to 
the  Governor  not  exceeding  four  statements  a  year  to  the  State 
Bank  Examiner,  which  statements  were  required  to  be  published. 
Upon  the  adoption  of  the  constitutional  amendment  above  re- 
ferred to,  a  general  law  for  the  incorporation  of  banks  was  en- 
acted. This  was  superseded  by  the  Act  of  1893,  which  remained 
in  force  until  the  present  law  went  into  effect.  The  amendment 
of  bank  charters  in  certain  particulars  w£p  authorized  in  1896. 

There  was  no  considerable  change  in  the  law  until  the  Bank 
Bureau  Act  of  1907  was  adopted.  This  act,  following  in  many 
particulars  the  National  Bank  Act,  did  much  to  create  a  modern 
banking  system.  Unfortunately,  however,  it  left  in  force  much 
of  the  old  law  which  had  been  brought  forward  from  the  days 
when  the  principal  function  of  banks  was  the  issuance  of  circu- 
lating notes  or  bank  bills.  It  made  no  attempt  to  harmonize  pre- 
vious laws.  It  was  notably  deficient  in  failing  to  impose  any  re- 
strictions upon  or  require  any  supervision  over  the  organization  of 
a  bank.  In  granting  and  amending  charters  under  the  Act  of 
1893,  the  Secretary  of  State  had  no  discretion,  but  performed  a 

be 


x  HISTORICAL  NOTE. 

ministerial  function  only.  Nor  did  the  Bank  Bureau  Act  make 
adequate  provision  for  the  liquidation  of  a  bank  and  its  adminis- 
tration in  the  event  of  insolvency.  The  old  Acts  of  1840  and  1842 
authorized  the  forfeiture  of  charters  in  certain  cases  and  the 
appointment  of  receivers  to  liquidate  the  banks  when  such  for- 
feiture was  had.  These  acts  continued  to  afford  the  only  ma- 
chinery for  administering  the  assets  of  a  bank  in  the  event  of  its 
failure. 

The  unsatisfactory  condition  of  the  banking  laws  after  the 
passage  of  the  act  creating  the  Bank  Bureau  led  the  writer  to  say 
in  the  preface  to  the  Georgia  Bankers'  Code  (published  in  1909)  : 
"The  banking  laws  of  Georgia  are  in  a  very  unsatisfactory,  not 
to  say  chaotic,  condition.  No  attempt  to  bring  them  into  a  sys- 
tematic or  harmonious  whole  has  been  made.  There  are  numer- 
ous provisions,  still  the  law  of  the  State,  which  were  applicable  to 
the  old  banks  of  issue  but  which  are  now  entirely  archaic  and 
useless.  Other  statutes  have  been  enacted  looking  to  the  creation 
of  banks  of  issue  when  Congress  shall  see  fit  to  remove  the  ten 
per  cent,  tax  on  State  bank  notes.  These  are  also  laws,  but 
whether  applicable  to  banks  as  at  present  organized  and  to  what 
extent  remains  to  be  decided.  *  *  *  Some  of  the  legislative 
acts  seem  to  have  been  passed  in  ignorance  or  disregard  of  exist- 
ing laws,  and  some  statutes  have  been  amended  or  changed  so 
often  that  it  is  difficult  to  determine  what  the  present  law  really 
is.  The  Act  of  1907  creating  the  Bank  Bureau  is  the  most  serious 
attempt  to  regulate  the  business  of  banking  which  has  been  made 
in  some  years,  but  this  act  is  very  crude  and  unsatisfactory.  It 
enacts  as  new  provisions  which  were  the  law  long  before  the  Code 
of  1895.  It  apparently  ignores  other  Code  sections,  leaving  it  in 
doubt  as  to  whether  they  are  still  the  law."  This  characterization 
of  the  law  has  been  qu<3^d  with  approval  more  than  once  by  dif- 
ferent State  Treasurers  in  their  efforts  to  secure  the  adoption  of 
a  more  satisfactory  banking  code. 

In  1911,  by  joint  resolution,  the  General  Assembly  appointed 
a  commission  with  authority  to  sit  in  vacation  and  prepare  and 
submit  a  comprehensive  banking  act.  This  Commission  invited 
the  Legislative  Committee  of  the  Georgia  Bankers'  Association, 
of  which  Mr.  Joseph  A.  McCord,  of  Atlanta,  was  the  chairman, 
and  the  writer  as  the  General  Counsel  of  the  Association,  to 
meet  with  the  Commission  and  assist  it  in  its  labors.  To  the 
writer  was  assigned  the  task  of  drafting  the  bill.  In  its  prep- 
aration the  laws  of  a  number  of  States  were  carefully  consid- 


HISTORICAL  NOTE.  xi 

ered.  The  sources  of  the  bill  as  prepared  were  principally  the 
Georgia  law,  the  National  Banking  Act  with  its  amendments,  the 
Banking  Laws  of  New  York  as  revised  in  1909,  and  the  new  Bank- 
ing Act  of  Alabama  adopted  in  1911.  The  proposed  act,  as 
drafted  and  approved  by  the  Commission,  was  introduced  in  both 
houses  of  the  General  Assembly  at  the  session  of  1912.  The  com- 
mittees of  the  two  houses  to  which  the  bill  was  referred  held 
joint  sessions  and  invited  bankers  and  others  interested  to  discuss 
the  bill,  which  was  considered  and  acted  upon  section  by  section. 
With  numerous  amendments  it  was  reported  favorably  by  the 
committees,  and  with  a  few  minor  changes  passed  the  Senate.  It 
came  up  for  final  consideration  in  the  House  on  the  last  night  of 
the  second  session,  and  on  account  of  its  length  was  tabled  to 
make  way  for  more  urgent  legislation.  At  almost  every  session 
of  the  Legislature  since  bills  to  amend  the  banking  laws  have 
been  introduced,  but  comparatively  few  acts  have  been  passed, 
and  none  of  these  has  affected  to  any  considerable  degree  the 
banking  system,  its  supervision  or  regulation. 

The  Legislature  in  1918  proposed  an  amendment  to  the  Con- 
stitution, increasing  the  salary  of  the  State  Treasurer  and  mak- 
ing provision  for  the  clerical  and  other  expenses  of  his  office. 
The  amendment  provided  that  it  should  take  effect  whenever  a 
separate  Department  of  Banking  should  be  created  and  the  Treas- 
urer relieved  of  his  duties  as  ex-officio  State  Bank  Examiner. 
At  the  general  election  in  1918  this  amendment  was  duly  ratified 
by  the  people.  This  at  last  opened  the  way  for  a  modern  banking 
system  under  the  control  of  a  department  charged  alone  with  its 
supervision  and  direction.  . 

The  Legislative  Committee  of  the  Georgia  Bankers'  Associa- 
tion, cooperating  with  a"  like  committee  of  the  Country  Bankers' 
Association,  undertook  to  prepare  and  submit  for  the  considera- 
tion of  the  General  Assembly  at  the  session  of  1919  a  complete 
banking  code,  designed  to  supersede  all  existing  laws  on  banks 
and  banking.  The  bill  prepared  by  the  Legislative  Commission 
in  1912  was  taken  as  the  basis  for  the  proposed  act.  Numerous 
changes  were  made  so  as  to  incorporate  in  the  bill  such  new  laws 
as  had  been  enacted  in  Georgia  since  its  preparation  and  to  in- 
clude also  a  number  of  provisions  taken  from  the  recent  statutes 
of  other  States  and  from  the  Federal  Reserve  Act.  The  writer, 
as  General  Counsel  for  the  Georgia  Bankers'  Association,  with  the 
assistance  of  Alexander  W.  Smith,  Esq.,  of  Atlanta,  General 
Counsel  for  the  Country  Bankers'  Association,  undertook  to  per- 


xii  HISTORICAL  NOTE. 

feet  the  bill.  As  finally  submitted,  it  was  approved  by  the  As- 
sociations at  their  annual  conventions.  It  was  endorsed  by  the 
State  Bank  Examiner,  and  the  Budget  and  Efficiency  Commis- 
sion. Some  minor  amendments  were  made  as  the  result  of  hear- 
ings by  the  committees  of  the  General  Assembly,  but  with  re- 
markably few  changes  the  bill  passed  both  houses  almost  unani- 
mously and  was  approved  by  the  Governor  on  August  19,  1919. 


PART  I. 

The  Banking  Act  of  1919  as  Amended, 
The  Trust  Company  Act. 
The  State  Depository  Act. 
Miscellaneous  Statutes  Affecting  Banks. 


AN  ACT  TO  REGULATE  BANKING  IN  THE  STATE;  OF  GEORGIA;  TO 
CREATE  THE  DEPARTMENT  OF  BANKING  OF  THE  STATE  OF 
GEORGIA;  TO  PROVIDE  FOR  THE  INCORPORATION  OF  BANKS,  AND 
THE  AMENDMENT,  RENEWAL  AND  SURRENDER  OF  CHARTERS; 
TO  PROVIDE  PENALTIES  FOR  THE  VIOLATIONS  OF  LAWS  WITH 
REFERENCE  TO  BANKING  AND  THE  BANKING  BUSINESS;  AND 
FOR  OTHER  PURPOSES. 

BE  IT  ENACTED  BY  THE  GENERAL  ASSEMBLY  OF  THE  STATE  OF 
GtEORGIA  AND  IT  IS  HEREBY  ENACTED  BY  AUTHORITY  OF  THE 
SAME,  AS  FOLLOWS  : 

ARTICLE  I. 

Preliminary  Provisions. 

§  1.     SECTION  1.     Bank,  Definition  of. 

The  term  "bank"  as  used  in  this  act  means  any  moneyed  cor- 
poration authorized  by  law  to  receive  deposits  of  money  and  com- 
mercial paper,  to  make  loans,,  to  discount  bills,  notes,  and  other 
commercial  paper,  to  buy  and  sell  bills  of  exchange,  and  to  issue 
bills,  notes,  acceptances  or  other  evidences  of  debt,  and  shall  in- 
clude incorporated  banks,  banking  companies,  trust  companies  and 
other  corporations  doing  a  banking  business  in  this  State,  but  shall 
not  include  private  bankers,  copartnerships  or  voluntary  associa^- 
tions  doing  a  banking  business,  or  national  banking  associations, 
or  building  and  loan  associations  or  similar  associations  or  cor- 
porations. The  term  "bank"  shall  include  a  branch  bank  unless 
the  context  indicates  that  it  does  not. 

This  definition  is  taken  substantially  from  the  New  York  Banking 
Law,  §  2. 

Under  the  Bank  Bureau  Act  of  1907  trust  companies  authorized 
to  receive  deposits  were  put  under  the  control  of  the  State  Bank 
Examiner  and  required  to  conform  to  the  laws  regulating  banks. 
Code,  §  2286.  The  same  act  excluded  from  such  control  private  banks 
and  bankers.  Code,  §  2311.  Under  Code,  §  2346,  the  term  "bank" 
included  the  "parent  bank,  its  branches  and  agencies." 

Other  definitions : 

"A  bank  is  an  institution  for  the  custody  and  loan  of  money,  the 
exchange  and  transmission  of  the  same  by  means  of  bills  and  drafts, 
and  the  issuance  of  its  own  promissory  notes,  payable  to  bearer,  as 

1 


2  PARK'S  BANKING  LAW  otf  GEORGIA. 

currency;  or  for  the  exercise  of  one  or  more  of  these  functions." 
3  Am.  &  Eng.  Enc.  of  Law,  2d  ed.,  p.  789. 

"Every  incorporated  or  other  bank,  and  every  person,  firm  or 
company  having  a  place  of  business  where  credits  are  opened  by  the 
deposit  or  collection  of  money  or  currency,  subject  to  be  paid  or 
remitted  upon  draft,  check,  or  order,  or  where  money  is  advanced 
or  loaned  on  stocks,  bonds,  bullion,  bills  of  exchange,  or  promis- 
sory notes,  or  where  stocks,  bonds,  bullion,  bills  of  exchange,  or 
promissory  notes  are  received  for  discount  or  for  sale,  shall  be  re- 
garded as  a  bank  or  as  a  banker."  U.  S.  Rev.  Stat.,  §  3407. 

"Having  a  place  of  business  where  deposits  are  received  and  paid 
out  on  checks  and  where  money  is  loaned  upon  security  is  the  sub- 
stance of  banking."  Warren  v.  Shook,  91  U.  S.  704. 

"National  banks  are  banking  institutions  created  under  the  laws 
of  the  United  States  which  are  private  associations  authorized  by 
Congress  for  the  joint  purposes  of  convenience  and  profit  to  the 
holders  of  United  States  bonds,  and  of  furnishing  the  public  with 
a  convenient  and  uniform  circulating  medium."  Linton  v.  Childs, 
105  Ga.  569. 

"A  savings  bank  in  the  strict  sense  of  the  term  is  an  institution 
the  object  of  which  is  to  receive  and  safely  invest  savings,  thus  af- 
fording to  its  depositors  the  advantages  of  security  and  interest  for 
their  money."  24  Am.  &  Eng.  Enc.  of  Law,  2d  ed.,  p.  1243. 

"An  institution  receiving  savings  deposits  and  paying  interest 
thereon  and  whose  deposits  are  not  subject  to  check  is  a  savings 
institution  under  the  laws  of  Georgia,  whether  such  an  institution 
has  a  capital  stock  or  simply  operates  upon  its  deposits."  Dotten- 
heim  v.  Union  Savings  Bank  &  Trust  Co.,  114  Ga.  788. 

"A  trust  company  is  a  corporation  created  for  the  purpose  of 
administering  trusts  and  trust  funds,  acting  as  agent,  trustee  or 
other  fiduciary  capacity.  It  is  not  a  bank  though  some  of  its  busi- 
ness is  closely  akin  to  banking  and  many  banks  are  also  trust  com- 
panies." 3  Am.  &  Eng.  Enc.  of  Law,  2d  ed.,  791 ;  Magee  on  Banks 
and  Banking,  p.  28. 

§  2.     SEC.  2.     Depositors. 

The  term  "depositor"  as  used  in  this  act  means  any  person  who 
shall  deposit  money  or  commercial  paper  in  any  bank,  either  on 
open  account,  subject  to  check,  or  to  be  withdrawn  otherwise  than 
by  check,  whether  interest  is  allowed  thereon  or  not,  and  shall 
include  holders  of  demand  and  time  certificates  of  deposit  law- 
fully issued. 

The  courts  have  not  agreed  as  to  whether  the  holder  of  a  cer- 
tificate of  deposit  was  to  be  classed  as  a  depositor  or  a  note  holder 
of  the  issuing  bank.  -The  Supreme  Court  of  Georgia,  in  Lamar  v. 
Taylor,  141  Ga.  227,  held  that  holders  of  certificates  of  deposit  are 
depositors  within  the  meaning  of  the  provision  imposing  on  stock- 
holders a  statutory  liability  for  the  payment  of  depositors.  This 
section  is  intended  to  relieve  all  doubt  as  to  the  status  of  depositors. 
Under  it,  one  depositing  money  is  a  depositor,  whether  he  holds  a 
certificate,  collects  interest,  or  deposits  simply  on  open  account  sub- 
ject to  check. 

"When  money  is  placed  in  a  bank  on  general  deposit,  the  title 
to  the  money  immediately  passes  to  the  bank,  and  the  relation  of 
debtor  and  creditor  is  created  between  the  bank  and  the  depositor. 
The  moment  the  deposit  is  made,  the  credit  of  the  banker  is  sub- 
stituted for  the  money."  McGregor  v.  Battle,  128  Ga.  577  (1). 


BANKING  ACT  OF  1919.  3 

"A  bank  is  not  liable  for  interest  on  funds  held  on  general  deposit 
in  the  absence  of  a  special  contract  therefor."  American  National 
Bank  v.  Burke.  81  Ga.  597. 

"Deposits  of  money  in  a  bank  do  not  constitute  a  case  of  naked 
deposit,  the  use  of  the  money  being  a  valuable  consideration.  A 
special  deposit  of  a  sealed  package  of  money  would  be  a  naked  de- 
posit." Code,  §  3496. 

"By  habitually  receiving  through  its  cashier,  special  deposits  to  be 
kept  gratuitously  for  mere  accommodation,  a  bank  will  incur  liabil- 
ity for  gross  negligence  in  respect  to  any  such  deposits,  received  in 
the  usual  way."  Chattahoochee  Natl.  Bank  v.  Schley,  58  Ga.  369. 

"Subject  to  check"  means  subject  to  payment  without  limitation  or 
restriction,  except  that  the  check  must  be  presented  to  the  bank 
within  banking  hours,  on  banking  days."  Dottenheim  v.  Union 
Savings  Bank  &  Tr.  Co.,  114  Ga.  788. 

§  3.     SEC.  3.     Branch  Banks. 

Banks  whose  capital  has  been  fully  paid  in  and  is  unimpaired 
may  establish  branches  in  the  cities  in  which  they  are  located  or 
elsewhere,  after  having  first  obtained  the  written  approval  of  the 
Superintendent  of  Banks,  which  approval  may  be  given  or  with- 
held by  the  Superintendent  in  his  discretion,  and  shall  not  be  given 
until  he  shall  have  ascertained  to  his  satisfaction  that  the  public 
convenience  and  advantage  will  be  promoted  by  the  opening  of 
such  branch. 

Such  branch  banks  shall  be  operated  as  branches  and  under  the 
name  of  the  parent  bank,  and  under  the  control  and  direction  of 
the  board  of  directors  and  executive  officers  of  said  parent  bank. 

The  board  of  directors  of  the  parent  bank  shall  elect  a  cashier, 
and  such  other  officers  as  may  be  required  to  properly  conduct  the 
business  of  said  branch,  and  a  board  of  directors,  or  loan  com- 
mittee, who  shall  be  responsible  for  the  conduct  and  management 
of  said  branch  but  not  of  the  parent  bank,  or  of  any  other  branch 
save  that  of  which  they  are  officers,  directors,  or  committee. 

At  the  time  of  the  establishment  of  any  branch  the  board  of  di- 
rectors of  the  parent  bank  shall  set  aside  for  the  exclusive  use  of 
the  said  branch  such  proportion  of  its  capital  [or  surplus]*  as  may 
be  required  by  the  Superintendent  of  Banks ;  in  no  event  less  than 
is  required  for  the  organization  of  a  bank  in  the  city,  town  or  vil- 
lage in  which  the  branch  shall  be  located.  Provided,  That  the  par- 
ent bank  shall  not  by  such  assignment  of  a  portion  of  its  capital 
reduce  the  capital  to  an  amount  less  than  is  required  for  the  or- 
ganization of  a  bank  in  the  city,  town  or  village  in  which  said 
parent  bank  is  located ;  [nor  shall  the  parent  bank  by  such  assign- 
ment of  a  portion  of  its  surplus  reduce  the  surplus  account  to  an 
amount  less  than  twenty  (20)  per  cent,  of  its  capital.]* 


*Words  enclosed  in  brackets  added  by  Act  approved  August  14,  1920. 


4  PARK'S  BANKING  LAW  OF  GEORGIA. 

Branch  banks  shall  be  taxed  on  the  capital  set  aside  to  their 
exclusive  use  in  the  counties,  municipalities  and  districts  in  which 
they  are  located,  and  the  parent  bank  shall  be  relieved  of  taxation 
to  the  extent  of  the  capital  set  aside  for  the  exclusive  use  of  such 
branches. 

The  general  law  for  the  incorporation  of  banks  made  no  pro- 
vision for  branch  banks.  A  number  of  the  old  charters  granted  by 
special  acts  of  the  Legislature  authorized  the  establishment  of 
branches,  and  the  Act  of  1859,  appearing  in  the  first  Code  (1863) 
as  §  1433,  provided  that  "the  term  bank  includes  the  parent  bank, 
its  branches,  if  any,  and  agencies."  This  act  has  been  brought 
forward  in  all  the  Codes,  appearing  in  Park's  Annotated  Code  as 
§  2346.  The  Act  of  1862  (Code,  §  2364)  authorized  suits  against  banks 
in  any  county  in  which  an  agency  had  been  established.  The  Gen- 
eral Tax  Acts  provide  that  all  property  used  in  operating  a  branch 
bank  shall  be  returned  for  taxation  in  the  county  where  such 
branch  bank  may  be  located.  Code,  §  991.  But  while  the  general  law 
did  not  provide  for  branch  banks,  branches  were  established  by 
a  number  of  banks,  and  the  right  to  establish  them  seems  not  to 
have  been  questioned.  This  section  was  intended  to  give  branch 
banks  a  definite  status  and  to  provide  for  the  method  of  conduct- 
ing them  and  their  relations  with  the  parent  bank.  The  requirement 
that  a  definite  portion  of  the  capital  must  be  assigned  to  the 
branches  is  in  keeping  with  the  requirements  of  the  U.  S.  Revised 
Statutes,  §  5155,  (§  9695  U.  S.  Comp.  Stat.,)  which  provide  that  State 
banks  having  branches,  the  capital  being  joint  and  assigned  to  and 
used  by  the  mother  bank  and  branches  in  definite  proportions,  may 
be  incorporated  as  national  banks  and  may  retain  such  branches. 

§  4.     SEC.  4.     Private  Banks. 

No  private  person,  firm,  or  voluntary  association  engaged  in  the 
business  of  banking  in  this  State,  not  subject  to  the  supervision  of 
the  Superintendent  of  Banks,  and  no  private  corporation,  except  a 
bank  duly  chartered  and  organized  under  the  laws  of  this  State  or 
under  the  Acts  of  Congress,  shall  make  use  of  any  office  sign  at 
the  place  where  such  business  is  transacted,  having  thereon  any 
name  importing  a  corporation,  or  the  name  of  any  city,  town  or 
county,  or  other  words,  indicating  that  such  office  or  place  of  busi- 
ness is  that  of  a  regular  chartered  bank;  nor  shall  such  person, 
firm,  or  corporation  make  use  of  or  circulate  any  letter-heads,  bill- 
heads, blank  notes,  blank  receipts,  certificates,  circulars,  or  any 
written  or  printed  paper  whereon  such  name  importing  a  corpora- 
tion, or  name  wherein  the  name  of  any  city,  town,  or  county  is 
used,  or  any  other  words,  indicating  that  such  business  is  the  busi- 
ness of  a  regularly  chartered  bank :  Provided,  That  no  private 
bank  engaged  in  business  at  the  time  of  the  passage  of  this  act 
shall  be  required  to  change  the  name  adopted  and  in  use  by  it. 

No  person,  firm,  or  voluntary  association,  or  private  corpora- 
tion, other  than  a  regularly  chartered  and  organized  bank,  shall 


BANKING  ACT  OF  1919.  5 

use  the  words  "bank,"  "banker,"  "banking  company,"  "banking 
house,"  or  any  other  similar  name  indicating  that  the  business 
done  is  that  of  a  bank,  either  upon  any  office  sign  at  its  place  of 
business  or  upon  any  of  its  letter-heads,  bill-heads,  blank  notes, 
receipts,  certificates,  circulars,  or  any  other  written  or  printed 
paper,  without  also  using  therewith  the  words  plainly  written  or 
printed,  so  that  the  same  may  be  readily  read,  "Private  Bank, 
Not  Incorporated,"  and  every  person,  firm,  association,  or  private 
corporation  other  than  a  regularly  chartered  bank,  advertising  to 
receive,  or  receiving  deposits,  shall  at  the  window  or  desk  at  which 
such  deposits  are  received  place  a  conspicuous  sign  with  letters 
not  less  than  one  inch  in  height,  upon  which  shall  be  printed  the 
words,  "Private  Bank,  Not  Incorporated."  Provided,  That  any 
private  banker  or  bankers,  engaged  in  the  banking  business  at  the 
time  of  the  passage  of  this  act,  may  continue  to  use,  without  fur- 
ther qualification  or  restriction,  the  word  "banker"  or  "bankers," 
where  the  use  of  their  names  conveys  unmistakably  that  they  are 
not  incorporated. 

Code,  §  2287,  provides  that  any  individual  firm  or  corporation 
doing  a  banking  business  may  prefix  before  its  name  the  words 
"banking  house  of,"  and  may  affix  after  its  name  the  words  "bank 
or  banker  or  bankers,"  while  Code,  §  2311,  excludes  private  banks 
and  bankers  from  the  supervision  of  the  State  Bank  Examiner. 
The  Act  of  1897,  p.  59,  provided  for  the  examination  of  private 
banks,  and  further  provided  that  private  bankers  should  have 
stamped  upon  their  stationery,  letter-heads  and  envelopes  the  words 
"not  incorporated."  This  act  was  repealed  by  the  Act  of  1898,  p. 
72.  The  prohibition  on  the  use  of  the  words  "bank,"  "banking  com- 
pany," etc.,  by  a  private  banker,  unless  he  shall  indicate  that  the 
bank  is  not  incorporated,  is  substantially  the  same  as  the  provision 
of  the  New  York  law,  §  141.  The  National  Bank  Act  contains  a 
like  prohibition  of  the  use  of  the  word  "national"  by  banks  other 
than  national  banking  associations,  §  5243,  U.  S.  R.  S. ;  §  9835  U.  S. 
Comp.  Stat. 

"Any  private  person,  firm,  or  unincorporated  company  who  con- 
ducts the  business  of  banking  without  a  charter  and  without  any 
special  privilege  or  authority  of  law  is  a  private  banker.  Such 
a  bank  has  no  capital  stock,  as  is  required  for  a  regular  bank.  De- 
posits in  such  a  bank  are  simply  loans  to  the  banker  on  his  individual 
credit."  Magee  on  Banks  and  Banking,  p.  23. 

§  5.     SEC.  5.     Insolvency  Defined. 

A  bank  shall  be  deemed  to  be  insolvent,  first,  when  it  can  not 
meet  its  liabilities  as  they  become  due  in  the  regular  course  of  busi- 
ness ;  second,  when  the  actual  cash  market  value  of  its  assets  is  in- 
sufficient to  pay  its  liabilities  to  depositors  and  other  creditors ; 
third,  when  its  reserve  shall  fall  under  the  amount  herein  required 
and  it  shall  fail  to  make  good  such  reserve  within  thirty  (30)  days 
after  being  required  to  do  so  by  the  Superintendent  of  Banks. 


6  PARK'S  BANKING  LAW  OF  GEORGIA. 

Under  the  Bankruptcy  Act  of  1898,  §  1,  "A  person  shall  be 
deemed  insolvent  *  *  *  when  the  aggregate  of  his  property 
*  *  *  shall  not  at  a  fair  valuation  be  sufficient  in  amount  to  pay 
his  debts."  The  usual  definition  of  insolvency,  however,  is  "inabil- 
ity to  pay  debts  as  they  become  due  in  the  usual  course  of  business." 
Bouvier's  Law  Dictionary,  p.  1602.  This  section  combines  both 
definitions  and  adds  a  third,  under  which  a  bank  is  deemed  in- 
solvent when  it  fails  to  make  good  its  reserve.  When  a  bank  is  in 
the  condition  described  in  this  section,  it  is  manifestly  not  Jn  posi- 
tion to  continue  for  long  active  operation.  It  should  not  accept 
additional  deposits,  and  it  is  best  for  all  parties  that  the  control  of 
its  affairs  pass  out  of  its  hands. 

§  6.     SEC.  6.     Surplus  and  Undivided  Profits  Defined. 

The  term  "surplus"  as  used  in  this  act  means  the  portion  or  por- 
tions of  the  "undivided  profits"  which  have  been  formally  set  apart 
by  resolution  of  the  board  of  directors  and  carried  to  surplus  ac- 
count on  the  books  of  account  of  the  bank,  as  well  as  such  amount 
as  may  be  paid  in  by  stockholders  for  the  purpose  of  creating  a 
surplus. 

The  term  "undivided  profits"  as  used  in  this  act  means  the  net 
profits  as  shown  by  the  books  of  account  of  the  bank,  in  addi- 
tion to  the  "surplus,"  less  such  amount  as  may  be  held  for  the 
payment  of  current  expenses,  taxes,  interest  on  savings  deposits 
and  dividends  to  stockholders. 

Code,  §  2277,  which  prohibited  a  bank  from  lending  to  one  person, 
unsecured,  more  than  ten  per  cent,  of  its  capital  and  surplus,  de- 
•  fined  "surplus"  to  mean  "the  net  profits  of  such  bank." 


ARTICLE  II. 

-. 

Department  of  Banking. 
§  7.     SECTION  1.     Department  of  Banking  Created. 

* 

There  is  hereby  created  a  Banking  Department  of  the  State  of 
Georgia  to  be  designated  as  the  "Department  of  Banking," 
charged  with  the  execution  of  all  laws  heretofore  passed  or  which 
may  hereafter  be  passed  relating  to  banks  as  herein  defined. 

Under  the  Act  of  1907,  Code,  §  2279,  the  enforcement  of  the  bank- 
ing laws  was  committed  to  a  Bureau  or  Department  of  the  State 
Treasury,  just  as  the  Comptroller  of  the  Currency,  charged  with 
the  enforcement  of  the  national  banking  laws,  is  an  officer  of 
the  Treasury  Department  of  the  National  Government.  The  pres- 
ent act  creates  a  separate  Department  of  Banking  similar  to  that 
of  New  York  (New  York  Act,  §  10)  and  to  that  established  under 
the  laws  of  most  of  the  States  which  have  adopted  modern  bank- 
ing systems. 


BANKING  ACT  OF  1919.  7 

§  8.     SEC.  2.     Superintendent  of  Banks. 

The  chief  officer  of  the  Department  of  Banking  shall  be  known 
as  the  Superintendent  of  Banks.  He  shall  be  appointed  by  the 
Governor,  by  and  with  the  advice  and  consent  of  the  Senate.  The 
first  appointment  hereunder  shall  be  made  at  least  ten  days  before 
this  act  takes  effect,  and  the  appointee  shall  discharge  the  duties 
of  the  office  pending  confirmation  by  the  Senate. 

The  Superintendent  of  Banks  shall  hold  office  for  the  term  of 
four  years,  and  until  his  successor  is  appointed  and  qualified. 

Under  the   Bank  Bureau  Act  of   1907,   Code,  §   2280,  the   State 
Treasurer  was  ex-officio  State  Bank  Examiner. 
This  section  follows  §  10  of  the  New  York  law. 

§  9.     Sue.  3.     Vacancies,  How  Filled. 

In  the  event  there  shall  be  a  vacancy  in  the  office  when  the  Sen- 
ate is  not  in  session,  caused  by  death,  resignation,  disability,  sus- 
pension or  removal  of  the  Superintendent  of  Banks,  the  Assistant 
Superintendent  shall  act,  holding  the  office  until  the  Senate  con- 
venes and  a  successor  to  the  Superintendent  of  Banks  is  appointed 
and  qualified.  When  the  Assistant  Superintendent  shall  hold  the 
office  of  Superintendent,  as  herein  provided,  he  shall  receive  the 
same  salary,  and  give  the  same  bond  as  herein  provided  for  the 
Superintendent  of  Banks. 

This  section  follows  in  substance  §  14  of  the  New  York  law. 

§  10.     SEC.  4.     Qualifications  of  Superintendent. 

The  Superintendent  of  Banks  shall  be  a  man  of  good  character 
and  shall  have  at  least  five  years  active  experience  in  the  banking 
business.  He  shall  not  during  his  term  of  office  be  an  officer  or 
employee  of  any  bank,  or  either  directly  or  indirectly  interested  in 
any  bank,  and  shall  not  carry  on  business  as  a  private  banker  or  be 
an  employee  of  or  interested  directly  or  indirectly  in  any  private 
bank.  He  shall  not  be  or  become  indebted  directly  or  indirectly 
to  any  bank  as  herein  defined.  The  Governor  shall  immediately 
remove  from  office  any  Superintendent  of  Banks  violating  the 
provisions  of  this  section. 

Under  the  old  law,  the  State  Treasurer,  being  ex-officio  State 
Bank  Examiner,  was  not  chosen  by  reason  of  any  qualification  for 
the  discharge  of  the  duties  devolving  on  him  as  such  Bank  Ex- 
aminer. It  was  provided,  however,  by  Code,  §  2285,  that  it  should 
not  be  lawful  for  him  or  either  of  his  assistants  to  be  "an  officer 


8  PARK'S  BANKING  LAW  OF  GEORGIA. 

or  stockholder  of  any  bank  or  firm  doing  a  banking  business  or 
be  engaged  individually  in  banking  in  this  State  or  elsewhere." 
Under  the  National  Bank  Act,  §  329,  U.  S.  R.  S.,  §  501,  U.  S.  Comp. 
Stat.,  the  Comptroller  of  the  Currency  is  prohibited  from  being 
interested  in  any  association  issuing  currency  under  the  laws  of 
the  United  States. 

This  section  is  a  combination  of  §  1  of  the  Alabama  act  and  §  10 
of  the  New  York  law  so  far  as  the  same  prescribe  the  qualifications 
of  the  Superintendent  of  Banks. 

§  11.     SEC.  5.     Salary  of  Superintendent. 

The  Superintendent  of  Banks  shall  receive  a  salary  of  six  thou- 
sand ($6,000.00)  dollars  per  annum,  to  be  paid  in  the  same  man- 
ner as  the  other  expenses  of  the  Department  of  Banking  are  paid. 
He  shall  receive  no  fees  or  perquisites  for  any  official  act,  but  the 
fees  prescribed  herein  shall  be  collected  by  him  and  deposited  to 
the  credit  of  the  Department  of  Banking,  as  hereinafter  pro- 
vided. 

The  salary  of  the  State  Bank  Examiner,  in  addition  to  his  salary 
as  State  Treasurer,  was  $2,500.  Code,  §  2280. 

The  salary  of  the  Superintendent  of  New  York  is  $10,000.00  (N. 
Y.  Law,  §  10)  and  that  of  Alabama  $5,000.00  (Ala.  Act,  §  1). 

§  12.     Sue.  6.     Oath  and  Bond  of  Superintendent. 

Before  entering  upon  the  duties  of  his  office,  the  Superintendent 
of  Banks  shall  take  an  oath  before  the  Governor  or  one  of  the  jus- 
tices of  the  Supreme  Court  to  support  the  Constitution  of  the  United 
States  and  the  Constitution  of  the  State  of  Georgia,  and  faithfully 
to  execute  the  duties  of  his  office,  which  oath  shall  be  in  writing 
and  subscribed  to  by  the  Superintendent  of  Banks  and  filed  of 
record  in  the  Executive  Office.  He  shall  also  give  bond  to  the 
State  of  Georgia  with  security  or  securities  approved  by  the  Gov- 
ernor in  the  sum  of  fifty  thousand  ($50,000.00)  dollars,  con- 
ditioned as  follows : 

(1)  That  he  will  faithfully  discharge,  execute,  and  perform, 
all  and  singular,  the  duties  required  of  him,  and  which  may  be 
required  by  the  Constitution  and  laws. 

(2)  That  he  will  faithfully  account  for  all  moneys  that  may 
be  received  by  him  from  time  to  time  by  virtue  of  his  office. 

(3)  That  he  will  safely  deliver  to  his  successor  all  books, 
moneys,  vouchers,  accounts  and  effects  whatever  belonging  to 
said  office. 

The  surety  on  the  bond  shall  be  a  regular  incorporated  surety 
company  or  companies,  qualified  to  do  business  in  the  State  of 


BANKING  ACT  OF  1919.  9 

Georgia,  and  the  premium  on  the  bond  shall  be  paid  as  other  ex- 
penses of  the  Department  of  Banking  are  paid. 

No  additional  oath  or  bond  was  required  of  the  State  Bank  Ex- 
aminer other  than  that  taken  and  given  by  him  as  State  Treas- 
urer. Code,  §  2281.  The  oath  prescribed  in  this  section  is  in 
almost  the  same  words  as  that  of  the  State  Treasurer.  Code,  § 
£17.  The  State  Treasurer  was  required  to  pay  the  premium  on 
his  own  bond,  but  under  the  Constitutional  amendment  increasing 
the  Treasurer's  salary  and  providing  for  separating  the  Banking 
Department  from  the  Treasury,  the  State  pays  the  premium  on 
the  Treasurer's  bond  in  the  same  way  as  is  provided  in  this  section 
for  the  payment  of  the  premium  on  the  Superintendent's  bond.  .Acts 
1918,  p.  91. 

Similar  oaths  and  bonds  are  required  in  New  York  (N.  Y.  Law, 
§  10)  and  in  Alabama  (Ala.  Act,  §  1). 

§  13.     SEC.  7.     Superintendent,  How  Removed. 

The  Superintendent  of  Banks  may  be  suspended  or  removed 
by  the  Governor,  whenever  the  Governor  has  trustworthy  infor- 
mation, to  be  judged  of  by  him,  that  the  Superintendent  is  insane 
or  has  absconded  or  grossly  neglects  his  duties  or  is  guilty  of  con- 
duct plainly  violative  of  his  duties. 

The  grounds  for  removing  the  Superintendent  are  similar  to  those 
provided  for  the  suspension  of  the  State  Treasurer.  Code,  §§  221, 
222. 

The  Superintendent  of  Alabama*  may  be  removed  for  substantially 
the  same  reasons.  §  1,  Ala.  Act. 

§  14.     SEC.  8.     Superintendent's  Office. 

The  Superintendent  of  Banks  shall  be  provided  with  suitable 
apartments  at  the  State  Capitol,  furnished  at  the  State's  expense. 
He  shall  reside  at  the  Capital  and  shall  keep  his  office  open  daily, 
Sundays  and  holidays  excepted.  He  shall  be  furnished  from  time 
to  time,  necessary  [equipment]*  furniture,  fuel,  lights,  and  other 
proper  conveniences  for  the  transaction  of  the  business  of  his  of- 
fice, the  expense  of  which  shall  be  paid  by  the  State  in  the  same 
manner  as  the  expenses  of  other  offices  at  the  Capitol  are  paid. 

No  separate  offices  for  the  Banking  Department  were  provided 
for  the  State  Bank  Examiner,  the  Department  being  conducted  in 
the  same  offices  as  the  Treasury  Department. 

A  similar  provision  is  found  in  the  Alabama  law,  §  5. 

§  15.     SEC.  9.     Seal  of  Department  of  Banking. 

The  Secretary  of  State  shall  provide  the  Superintendent  of 
Banks  with  an  official  seal.  Any  paper  executed  by  him  as  such 


*Inserted  by  Act  of  August  14,  1920. 


10  PARK'S  BANKING  LAW  OF  GEORGIA. 

Superintendent  of  Banks  in  pursuance  of  any  authority  conferred 
on  him  by  law  and  sealed  with  his  seal  of  office  shall  be  received 
in  evidence  with  the  same  effect  as  a  duly  recorded  deed. 

No  provision  was  made  for  a  seal  of  the  Banking  Department 
until  the  adoption  of  this  law.  This  provision  is  taken  substantially 
from  §  11  of  the  New  York  Banking  Law.  A  similar  provision  for 
a  seal  and  the  effect  to  be  given  to  papers  executed  under  seal  is 
found  in  the  National  Bank  Act,  §§  330,  884,  U.  S.  R.  S.;  §§  502, 
1496  U.  S.  Comp.  Stat. 

§  16.  SEC.  10.  Assistant  Superintendent,  Examiners,  and 
Clerks. 

The  Superintendent  of  Banks  shall  appoint  from  time  to 
time,  with  the  right  to  discharge  at  will,  an  Assistant  Superin- 
tendent who  shall  be  ex-officio  an  Examiner,  and  such  additional 
Examiners  and  office  assistants  as  he  may  need  to  discharge  in  a 
proper  manner  the  duties  imposed  upon  him  by  law,  provided  that 
such  appointments  shall  not  extend  beyond  the  term  of  office  of 
the  Superintendent  of  Banks  making  such  appointments. 

No  person  so  appointed  shall  during  his  term  of  office  be  an 
officer  or  employee  of  any  bank,  or  either  directly  or  indirectly 
interested  in  any  bank.  He  shall  not  carry  on  business  as  a  pri- 
vate banker  or  be  an  employee  of  or  interested  directly  or  indi- 
rectly in  the  business  of  any  private  banker.  He  shall  not  be  or 
become  indebted  directly  or  indirectly  to  any  bank,  as  herein  de- 
fined. The  Superintendent  of  Banks  shall  immediately  remove 
from  office  any  Assistant  Superintendent,  Examiner,  or  Office 
Assistant  violating  the  provisions  of  this  section. 

The  Assistant  Superintendent,  Examiners  and  clerks  shall  per- 
form such  duties  as  may  be  assigned  to  them,  respectively,  by  the 
Superintendent  of  Banks. 

This  provision  is  quite  similar  to  the  power  given  to  the  State 
Bank  Examiner  to  appoint  his  assistants.  Code,  §  2282.  The  pres- 
ent section  is,  however,  fuller,  especially  with  regard  to  the  qualifi- 
cations of  the  Assistant  Superintendent  and  Examiners. 

§  17.     SEC.  11.     Oath  and  Bond  of  Assistant  Superintendent 

and  Examiners. 

The  Assistant  Superintendent  and  each  of  the  Examiners 
shall  take  the  same  oath  as  that  herein  prescribed  for  the  Su- 
perintendent of  Banks,  and  each  shall  give  a  bond  to  be  ap- 
proved by  the  Superintendent,  with  a  regular  incorporated 
surety  company  qualified  to  do  business  in  the  State  of  Georgia, 


BAXKIXG  ACT  OF  1919.  11 

as  security,  payable  to  the  State  of  Georgia,  in  the  penal  sum 
of  ten  thousand  ($10,000.00)  dollars,  with  the  same  conditions 
contained  in  the  bond  as  those  herein  prescribed  for  the  Super- 
intendent of  Banks,  the  premium  on  which  said  bonds  shall  be 
paid  as  other  expenses  of  the  Department  of  Banking  are  paid. 

The  reemrement  as  to  oath  and  bond  of  the  Assistant  and  Ex- 
aminers is  similar  to  that  provided  under  the  former  law.  Code, 
§  2283.  The  amount  of  the  bond,  however,  is  increased  from 
$5,000.00  to  $10,000.00. 

§  18.  SEC.  12.  Salaries  of  Assistant  Superintendents,  Exam- 
iners, and  Clerks. 

The.  Assistant  Superintendent  shall  be  paid  a  salary  of  thirty- 
six-hundred  ($3,600.00)  dollars  per  annum. 

Each  of  the  Examiners  shall  be  paid  a  salary  of  not  exceeding 
twenty-four  hundred  ($2.400.00)  dollars  per  annum. 

The  salaries  of  the  Clerks  and  Office  Assistants  shall  not  exceed 
in  the  aggregate  the  sum  of  [five  thousand  ($5,000)]*  dollars 
per  annum. 

Under  the  former  lav  as  amended,  the  salary  of  the  first  assistant 
was  $2.000.00  and  of  the  Examiners  $1.800.00  each.  Code,  §  2283. 
The  State  Bank  Examiner  was  also  authorized  to  employ  clerical 
assistants  in  addition  to  the  Examiners.  Code,  §  2284  (a.  b). 

§  19.     SEC.  13.     Traveling  Expenses. 

The  traveling  expenses  of  the  Superintendent  of  Banks,  the  As- 
sistant Superintendent,  and  the  Examiners,  actually  paid  in  the 
discharge  of  their  duties,  shall  be  audited  and  approved  by  the  Su- 
perintendent of  Banks,  and  paid  monthly  as  other  expenses  of  the 
Department  of  Banking  are  paid.  Itemized  statements  shall  be 
kept  by  the  Superintendent  and  Examiners,  showing  in  detail  their 
expenses  and  each  and  every  item  thereof,  in  such  form  and  ac- 
companied by  such  vouchers  as  the  Superintendent  shall  pre- 
scribe, which  statements  shall  be  filed  in  the  office  of  the  Superin- 
tendent. 

This  is  substantially  the  same  as  die  Alabama  law,  §  4. 

§  20.     SEC.  14.     Expenses  of  the  Department  of  Banking,  How 

Paid. 

All  the  expenses  incurred  in  and  about  the  conduct  of  the 
business  of  the  Department  of  Banking,  including  the  sal- 


*Increased  from  $3,600.00  by  Act  of  August  14,  1920. 


12  PARK'S  BANKING  LAW  OF  GEORGIA. 

aries  of  the  Superintendent  of  Banks,  the  Assistant  Superin- 
tendent, the  Examiners,  and  office  assistants,  and  the  traveling 
expenses  incurred  in  examining  banks,  except  the  office  expenses 
[including  printing,  postage,  stationery  and  office  supplies,  tele- 
phone and  telegraph  tolls]*  provided  for  in  section  8  of  this  Ar- 
ticle, shall  be  collected  from  the  banks  as  hereinafter  provided. 
All  amounts  so  paid  shall  be  deposited  by  the  Superintendent  of 
Banks  in  such  bank  or  banks  as  he  may  see  fit  and  subject  to  his 
check  as  such  Superintendent,  and  shall  be  used  for  the  expenses 
of  the  Department  of  Banking  only. 

Under  the  former  law,  the  State  Bank  Examiner  kept  the  funds 
of  the  Banking  Department  separate  from  the  funds  in  the  State 
Treasury.  No  provision  was  made,  however,  for  auditing  the  ex- 
pense accounts  of  the  Examiners  or  for  the  deposit  and  disburse- 
ment of  the  funds  collected. 

§  21.     SEC.  15.     Report  of  the  Superintendent  of  Banks. 

The  Superintendent  of  Banks  shall  make  an  annual  report  to 
the  Governor  on  or  before  the  31st  day  of  December,  which  report 
shall  be  filed  in  his  office,  and  by  him  laid  before  the  General 
Assembly  in  connection  with  his  first  annual  message  thereafter. 

This  is  practically  a  reenactment  of  Code,  §  2294. 

§  22.     SEC.  16.     Contents  of  the  Report. 

The  Superintendent  of  Banks  shall  set  forth  in  his  annual  re- 
port: 

1.  A  list  of  all  the  banks  subject  to  his  supervision,  with  the 
date  when  each  began  business. 

2.  A  summary  of  the  condition  of  every  bank,  as  shown  by 
the  last  report  received  in  response  to  call  and  such  condition  as 
shown  by  the  last  examination  made,  and  such  other  informa- 
tion in  relation  to  said  bank  as  in  his  judgment  may  be  useful. 

3.  A  statement  of  all  applications  for  incorporation  of  new 
banks  and  of  all  applications  for  the  amendment,  renewal,  and 
surrender  of  charters,  together  with  his  action  thereon. 

4.  A  statement  of  all  banks  whose  business  has  been  closed 
during  the  year. 

5.  A  list  of  all  banks  taken  possession  of  by  him  during  the 
year,  and  of  the  dividends  paid  to  creditors  of  all  banks  being 
liquidated,  and  of  the  unclaimed  and  unpaid  deposits  or  dividends 
of  each  of  such  banks. 


*Inserted  by  Act  of  August  14,  1920. 


BANKING  ACT  OF  1919.  13 

6.  Any  suggestion  for  amendments  to  the  laws  relating  to 
banking  by  which  the  system  may  be  improved  and  the  security 
to  the  depositors  and  other  creditors  increase. 

7.  The  names  and  compensation  of  his  Assistant,  Examiners, 
and  Clerks,  and  the  whole  amount  of  the  expenses-  of  the  banking 
department  during  the  year. 

8.  An  itemized  statement  of  the  amounts  collected  from  the 
banks  from  examinations,  fines,  and  forfeitures  during  the  year. 

This  is  largely  a  reenactment  of  §  2296,  there  being  added  the 
provision  as  to  applications  for  incorporation,  amendment,  re- 
newal and  surrender  of  charters  and  as  to  banks  taken  possession 
of  by  the  Superintendent  and  the  amounts  collected  from  banks 
for  examinations,  etc.  A  similar  provision  is  found  in  the  New 
York  Act,  §  83.  A  report  of  like  character  is  required  of  the 
Comptroller  of  the  Currency  with  regard  to  national  banks  under 
the  National  Bank  Act,  §  333,  U.  S.  R.  S. ;  §  505  U.  S.  Comp.  Stat. 

§  23.     SEC.  17.     Copies  of  Report  Furnished  to  Banks. 

The  annual  report  of  the  Superintendent  of  Banks  shall  be  pub- 
lished in  book  form,  and  a  copy  thereof  furnished  to  each  bank  by 
mail  as  soon  as  the  same  shall  have  been  published  and  transmitted 
to  the  Governor.  [The  expense  of  publishing  and  mailing  such 
reports  shall  be  paid  as  other  expenses  of  the  Department  of  Bank- 
ing are  paid.]* 

This  is  substantially  a  reenactment  of  Code,  §  2297. 

§  24.     SEC.  18.     Rules  for  the  Department  of  Banking. 

The  Superintendent  of  Banks  shall  make  such  rules  and  regula- 
tions to  carry  out  the  provisions  of  this  act  as  he  may  consider  of 
value  to  the  Department  of  Banking.  He  may  appoint  special 
Examiners,  when  occasion  requires,  prescribe  their  duties,  and 
limit  their  powers.  He  shall  prescribe  and  provide  forms,  and 
supply  the  necessary  blanks  for  examinations  and  reports. 

This  section  combines  Code  §§  2298  and  2310. 

§  25.     SEC.  19.     Reports  and  Examinations. 

The  reports  of  all  examinations  and  the  reports  made  by  banks 
in  response  to  the  calls  made  by  the  Superintendent  of  Banks  shall 
be  regularly  filed  and  preserved  by  the  Superintendent  of  Banks 
in  his  office  for  a  period  of  five  (5)  years,  after  which  time  the 
Superintendent  shall  be  authorized  to  burn  the  same. 

This  is  a  reenactment  in  substance  of  Code,  §  2312. 


*The  sentence  enclosed  in  brackets  stricken  by  Act  of  August  14,  1920. 


14  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  26.     SEC.  20.     Reports  as  Evidence. 

Every  official  report  made  by  the  Superintendent  of  Banks-  and 
every  sworn  report,  duly  verified,  of  any  regular  or  special  Exam- 
iner duly  appointed  by  the  Superintendent  of  Banks,  shall  be 
prima  facie  evidence  of  the  facts  therein  stated,  in  any  action  or 
proceeding  wherein  such  bank  is  a  party,  provided  that  the  re- 
ports of  such  examinations  shall  not  be  made  public  except  when 
required  in  legal  proceedings.  [The  expense  of  furnishing  certi- 
fied copies  of  records  and  reports  by  the  Superintendent  of  Banks 
shall  be  paid  by  the  person  applying  for  such  certified  copies  be- 
fore such  copies  are  delivered,  except  where  such  copies  are  called 
for  on  behalf  of  the  State.]* 

A  similar  provision  is  made  in  the  National  Bank  Act,  §  884,  U.  S. 
R.  S. ;   §  1496  U.  S.  Comp.  Stat. 

§  27.     SEC.  21.     Liability  for  Nonperformance  of  Duty. 

The  Superintendent  of  Banks,  the  Assistant  Superintendent,  and 
the  Examiners  shall  be  liable  on  thein.official  bonds  to  any  person, 
firm,  or  corporation  injured  on  account  of  the  failure  of  the  Su- 
perintendent, the  Assistant  Superintendent,  or  any  Examiner,  to 
faithfully  discharge  the  duties  of  his  office.  Suit  may  be  brought 
thereon  in  any  court  of  competent  jurisdiction  in  the  name  of  the 
State  for  the  use  of  the  injured  party. 

This  section  is  taken  from  the  Alabama  Law,  §  34. 

§  28.     SEC.  22.     Solicitors-General  to  Represent  Superintend- 
ent. 

The  Solicitors-General,  in  their  several  circuits,  when  re- 
quested by  the  Superintendent  of  Banks,  shall,  as  a  part  of 
their  official  duties,  represent  the  Superintendent  of  Banks  in 
any  suit  that  the  Superintendent  may  desire  to  bring,  or  that  may 
be  brought  against  the  Superintendent  under  the  provisions  of 
this  act,  in  regard  to  banks  in  their  respective  circuits.  The  fees 
of  the  Solicitors-General  for  services  rendered  under  this  section 
shall  be  fixed  by  the  Superintendent  subject  to  the  approval  of 
the  judge  of  the  Superior  Courts  in  which  such  suits  are  brought. 
Such  fees  and  the  costs  of  any  such  suits  or  proceedings  by  or 
against  the  Superintendent  of  Banks  shall  be  taxed  by  the  judge 
of  the  Superior  Court  in  which  such  suit  is  brought  either  against 

*Added  by  Act  of  August  14,  1920. 


BANKING  ACT  OF  1919.  15 

the  opposite  party  to  such  suit,  or  against  the  bank  concerning 
which  the  suit  is  brought,  or  against  the  Superintendent,  in  which 
latter  event  such  costs  and  fees  shall  be  paid  as  other  expenses  of 
the  Department  of  Banking  are  paid. 

Under  the  Constitution,  it  is  the  duty  of  the  Solicitor-General 
to  represent  the  State  in  all  cases  in  the  Superior  Courts  of  his 
circuit.  Code,  §  6531.  The  National  Bank  Act  requires  that  suits 
and  proceedngs  arising  out  of  that  act,  in  which  the  United  States 
or  any  of  its  officers  or  agents  shall  be  parties,  shall  be  conducted 
by  the  district  attorneys  under  the  supervision  and  direction  of  the 
Solicitor  of  the  Treasury.  §  380,  U.  S.  R.  S.;  §  556,  U.  S.  Comp. 
Stat.  In  Alabama  the  circuit  solicitor  and  the  county  solicitor  of 
each  county  are  required  to  represent  the  Superintendent  without 
compensation.  §  49,  Ala.  Act. 

§  29.     SEC.  23.     Attorney-General  and  Solicitors-General  to 
Advise  Superintendent. 

It  shall  be  the  duty  of  the  Attorney-General  to  advise  the  Su- 
perintendent of  Banks  on  any  question  of  law  submitted  to  him  by 
the  Superintendent,  and  it  shall  likewise  be  the  duty  of  the  So- 
licitors-General, in  their  several  circuits,  when  requested  by  the 
Superintendent  of  Banks,  to  advise  the  Superintendent  on  any 
question  of  law  submitted  to  them  by  the  Superintendent  in  re- 
gard to  any  existing  or  proposed  banks  in  their  respective  circuits. 

Under  the  Constitution,  it  is  the  duty  of  the  Attorney-General 
to  act  as  legal  advisor  of  the  Executive  Department.  Code,  §  6529, 
§  254.  Under  the  Alabama  law  the  circuit  and  county  solicitors  are 
required  to  advise  the  Superintendent.  §  49,  Ala.  Act. 


ARTICLE  III. 

Examinations  of  Banks. 

§  30.     SECTION  1.     Semiannual  Examinations. 

The  Superintendent  of  Banks  shall  either  personally  or  by  one 
of  the  Examiners  visit  and  examine  every  bank  subject  to  his  su- 
pervision at  least  twice  in  each  year.  On  every  examination,  in- 
quiry shall  be  made  as  to  the  condition  and  resources  of  the  bank, 
the  mode  of  conducting  and  managing  its  affairs,  the  manner  of 
keeping  its  accounts  and  the  correctness  thereof,  the  actions  of  its 
directors,  the  investment  of  its  funds,  the  safety  and  prudence  of 
its  management,  and  whether  the  requirements  of  its  charter  and 
the  law  have  been  complied  with  in  the  administration  of  its 


16  PARK'S  BANKING  LAW  OF  GEORGIA. 

affairs,  and  as  to  such  other  matters  covered  by  this  act  as  the 
Superintendent  of  Banks  may  prescribe. 

The  first  act  in  Georgia  requiring  the  examination  of  banks 
was  the  Act  of  1889,  p.  65,  which  constituted  the  State  Treasurer 
ex-officio  Bank  Examiner  and  required  him  to  make  an  exami- 
nation of  each  bank  twice  in  each  year.  •  The  above  section  fol- 
lows closely  Code,  §  2299,  taken  from  the  Bank  Bureau  Act  of 
1907.  A  similar  provision  is  found  in  the  New  York  law,  §  39, 
and  in  the  Alabama  law,  §  7.  All  of  these  acts  and  the  similar 
acts  of  most  of  the  States  are  based  on  the  National  Bank  Act,  § 
5240,  U.  S.  R.  S. ;  §  9832  U.  S.  Comp.  Stat. 

§  31.     SEC.  2.     Special  Examinations. 

In  addition  to  the  regular  semiannual  examinations  the  Superin- 
tendent of  Banks  has  power  and  it  shall  be  his  duty  in  like  manner 
to  examine,  or  cause  to  be  examined,  any  bank  under  his  super- 
vision whenever  in  the  judgment  of  the  Superintendent  of  Banks 
the  management  and  condition  of  the  bank  is  such  as  to  render  an 
examination  of  its  ai?airs  necessary  or  expedient,  or  whenever  in 
the  opinion  of  the  Superintendent  of  Banks  the  interests  of  the 
public  demand  an  examination. 

This  provision  is  new  in  Georgia,  though  there  is  little  doubt 
but  that  the  State  Bank  Examiner  was  authorized  to  make  special 
examinations  whenever  in  his  judgment  it  was  necessary,  Code,  § 
2299,  providing  that  examinations  should  be  made  "twice  in  each 
year  and  oftener  if  necessary."  The  section  follows  the  language 
of  §  7  of  the  Ala.  Act. 

§  32.     SEC.  3.     Examinations  on  Oath. 

The  Superintendent  of  Banks  and  the  Examiners  shall  have 
power  and  authority  to  administer  oaths  and  to  examine  under 
oath  any  person  whose  testimony  may  be  required  on  the  exami- 
nation of  any  bank,  and  shall  have  the  authority  and  power  to 
compel  the  appearance  and  attendance  of  aijy  such  person  for  the 
purpose  of  such  examination. 

If  any  person  when  required  so  to  do  by  the  Superintendent 
of  Banks,  or  any  one  of  the  Examiners,  shall  fail  or  refuse  to 
appear  or  to  testify  under  oath  as  herein  provided,  such  failure 
or  refusal  may  be  reported  in  writing  to  the  judge  of  the  Superior 
Court  of  the  county  in  which  such  bank  is  located,  who  shall 
thereupon  cause  a  subpoena  to  be  issued  by  the  clerk  of  said  court 
requiring  such  person  to  so  attend  and  testify,  and  for  failure 
to  obey  such  subpoena  the  person  so  failing  shall  be  adjudged  in 
contempt  of  court  by  the  judge  of  said  court  and  punished  ac- 
cordingly. 


BANKING  ACT  OF  1919.  17 

Similar  authority  was  given  the  State  Bank  Examiner  by  Code, 
§  2299.  The  language  of  this  section  follows  closely  §  7  of  the 
Alabama  law. 

§  33.     SEC.  4.     Written  Report  of  Examination. 

The  Superintendent  of  Banks  and  the  Examiner  who  shall  make 
an  examination  of  any  bank  shall  reduce  the  result  thereof  to  writ- 
ing in  such  form  as  shall  be  prescribed  by  the  Superintendent, 
which  shall  contain  a  full,  true,  and  correct  statement  of  the  con- 
dition of  such  bank  so  examined,  which  reports  shall  be  filed  in  the 
Department  of  Banking. 

This  section  is  a  reenactment  in  substance  of  a  portion  of  Code 
§  2299. 

§  34.     SEC.  5.     Fees  for  Examination. 

Each  bank  shall  pay  for  each  semiannual  examination  to  the 
Superintendent  of  Banks,  to  be  deposited  by  him  to  the  credit  of 
the  Department  of  Banking,  as  hereinbefore  provided,  in  propor- 
tion to  the  capital,  surplus  and  undivided  profits,  exclusive  of 
branches,  not  exceeding  the  following  amounts : 

Where  the  capital,  surplus  and  undivided  profits  is  $25,000.00 
or  less,  $20.00. 

^Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$2*5,000.00  and  not  exceeding  $50,000.00,  $30.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$50,000.00  and  not  exceeding  $75,000.00,  $40.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$75,000.00  and  not  exceeding  $100,000.00,  $50.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$100,000.00  and  not  exceeding  $125,000.00,  $60.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$125,000.00  and  not  exceeding  $150,000.00,  $70.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$150,000.00  and  not  exceeding  $175,000.00,  $80.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$175,000.00  and  not  exceeding  $200,000.00,  $90.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$200,000.00  and  not  exceeding  $225,000.00,  $100.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$225,000.00  and  not  exceeding  $250,000.00,  $110.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$250,000.00  and  not  exceeding  $275,000.00,  $120.00. 


18  PARK'S  BANKING  LAW  of  GEORGIA. 

Where  the  capital,  surplus  and  undivided  profits  isTmore  than 
$275,000.00  and  not  exceeding  $300,000.00,  $130.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$300,000.00  and  not  exceeding  $500,000.00,  $150.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$500,000.00  and  not  exceeding  $750,000.00,  $200.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$750,000.00  [and  not  exceeding  $1,000,000.00]*  $250.00. 

[Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$1,000,000.00  and  not  exceeding  $1,500,000.00,  $300.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$1,500,000.00  and  not  exceeding  $2,000,000.00,  $350.00. 

Where  the  capital,  surplus  and  undivided  profits  is  more  than 
$2,000,000.00,  $400.00.]* 

In  addition  to  the  fees  hereinabove  fixed  each  bank  operating 
branch  offices  or  banks  shall  pay  for  each  branch  so  operated  for 
each  semiannual  examination,  at  the  above  rates  based  on  the  cap- 
ital, surplus,  and  undivided  profits  employed  in  such  branch. 

For  any  examination  herein  provided  to  be  made  before  permit 
to  begin  business  is  issued,  or  on  any  amendment  to  a  charter,  or 
on  any  consolidation  or  merger,  or  on  any  voluntary  liquidation, 
and  in  all  other  cases  of  like  character,  other  than  regular  semi- 
annual examinations,  a  fee  of  $25.00  shall  be  paid  for  each  ex- 
amination. 

The  scale  of  fees  paid  by  banks  for  examinations  has  been 
changed  several  times.  The  scale  here  prescribed  slightly  in- 
creases the  amounts  paid  under  the  Act  of  1914 ;  Code,  §  2300. 

Heretofore  no  fee  has  been  fixed  for  the  examination  of  a  branch 
bank,  and  no  provision  has  been  made  for  special  examinations 
made  before  business  is  begun  or  on  the  amendment  or  renewal  of 
a  charter,  etc. 

§  35.     SEC.  6.     Fees,  How  Collected. 

In  the  event  any  bank  should  fail  or  refuse  to  pay  on  demand 
the  amount  herein  fixed  as  fees  for  examinations,  the  Superin- 
tendent of  Banks  shall  forthwith  issue  an  execution  in  the  name 
of  the  State  against  such  bank  for  the  amount  of  such  fees,  which 
shall  be  enforced  in  like  manner  as  executions  issued  by  the  Su- 
perior Courts  of  this  State  upon  judgments  rendered  by  them. 

Under  the  Alabama  law,  §  6,  a  penalty  of  $5.00  for  each  day 
is  assessed  against  banks  making  default  in  payments,  and  the 
Superintendent  is  authorized  to  collect  the  amount  by  suit.  The 


*Added  by  Act  of  August  14,  1920. 


BANKING  ACT  OF  1919.  19 

provision   of   this    section    authorizing   the    immediate    issuance    of 
execution  is  decidedly  better. 

§  36.     SEC.  7.     Record  of  Fees. 

It  shall  be  the  duty  of  the  Superintendent  of  Banks  to  keep  a 
record  of  all  fees  collected  by  him,  together  with  a  record  of  ex- 
penses incurred  in  making  examinations  of  all  banks,  which 
record  shall  be  embodied  in  his  annual  report  to  the  Governor. 

This  is  substantially  a  reenactment  of  Code,  §  2308. 

§  37.     SEC.  8.     Examinations  Not  at  Stated  Times. 

The  Superintendent  of  Banks  «hall  not  visit  any  bank  or  cause 
same  to  be  visited  by  an  Examiner  for  the  purpose  of  examination 
at  stated  or  regular  times,  nor  shall  the  Superintendent  or  any  Ex- 
aminer permit  any  one  to  know  when  or  at  what  time  he  will 
visit  any  bank  or  cause  same  to  be  visited,  for  examination. 

This  section  is  copied  from  §  11  of  the  Alabama  law. 

§  38.     SEC.  9.     Information  Kept  Secret. 

The  information  which  shall  be  obtained  by  Superintendent  of 
Banks  or  any  Examiner  in  making  examinations  into  the  affairs 
of  any  bank  shall  be  for  the  purpose  of  ascertaining  the  true  con- 
dition of  said  bank,  and  shall  not  be  disclosed  by  the  person  mak- 
ing the  examination,  unless  called  upon  to  testify  concerning  the 
same  in  a  court  of  justice,  except  that  reports  shall  be  made  of  the 
condition  of  the  affairs  of  the  bank  examined  and  to  the  Superin- 
tendent of  Banks,  and  a  summary  thereof  published  in  the  Super- 
intendent's annual  report,  and  except  that  the  Superintendent  may 
take  action  as  the  result  of  such  examination  as  herein  provided. 
Provided,  however,  That  upon  the  request  of  the  Federal  Reserve 
Bank  the  Superintendent  shall  be  authorized  to  furnish  to  said 
bank  a  copy  of  the  report  and  other  information  concerning  the 
condition  and  affairs  of  any  bank  which  shall  be  a  member  of  the 
Federal  Reserve  System ;  [and  provided  further,  that  the  Super- 
intendent of  Banks  may  in  his  discretion  confer  and  exchange  in- 
formation with  the  Comptroller  of  the  Currency  of  the  United 
States  and  National  Bank  Examiners  and  may  when  .he  shall  deem 
it  to  be  for  the  interest  of  the  bank  in  question  discuss  its  affairs 
with  other  banks  or  persons  interested  therein  or  affected  thereby.]* 


*Added  by  Act  of  August  14,  1920. 


20  PARK'S  BANKING  LAW  OF  GEORGIA. 

The  body  of  this  section  is  copied  from  §  12  of  the  Alabama  law. 
The  Act  of  1918,  p.  134,  authorized  the  Superintendent  to  furnish 
a  copy  of  his  report  of  examination  of  any  bank,  which  is  a  member 
of  the  Federal  Reserve  System,  to  the  Federal  Reserve  Bank. 
Congress,  by  the  Act  of  June  21,  1917,  authorized  the  Directors 
of  the  Federal  Reserve  Bank  to  accept  examinations  made  by 
State  authorities  in  lieu  of  examinations  made  by  Examiners  se- 
lected by  the  Federal  Reserve  Board  required  under  the  Federal 
Reserve  Act  whenever  the  Directors  approved  such  examinations. 
§  9792  (6),  U.  S.  Comp.  Stat. 

§  39.     SEC.  10.     Reports  as  Evidence. 

In  the  event  the  Superintendent  of  Banks  takes  charge  of  the 
business  and  affairs  of  any  bank  as  herein  authorized,  or  in  the 
event  proceedings  are  instituted  to  forfeit  the  charter  of  any  bank, 
duly  authenticated  copies  of  the  reports  of  the  examination  of  such 
bank  on  file  in  the  office  of  the  Superintendent  of  Banks  may  be 
used  in  any  court  as  evidence  and  as  an  aid  in  arriving  at  the  true 
condition  of  the  bank.  Such  reports  shall  be  received  in  any  court 
as  prima  facie  evidence  of  the  truth  of  their  contents. 

With  slight  change  in  phraseology,  this  section  is  copied  from 
§  14  of  the  Alabama  law.  Section  59  of  the  New  York  Act  is  prac- 
tically identical. 


ARTICLE  IV. 

Reports  of  Banks. 

§  40.     SECTION  1.     Stated  Reports. 

Every  bank  shall  make  at  least  four  (4)  reports  each  year,  and 
oftener  if  called  upon  by  the  Superintendent  of  Banks,  according 
to  the  form  which  may  be  prescribed  by  him,  verified  as  true  and 
correct  by  the  oath  or  affirmation  of  the  president  or  cashier,  and 
accompanied  by  the  certificate  of  at  least  two  (2)  of  the  direc- 
tors of  such  bank  to  the  effect  that  they  have  carefully  read  said 
report  and  that  the  same  is  true  and  correct  according  to  the  best 
of  their  information,  knowledge  and  belief,  and  that  the  signature 
of  the  president  or  cashier,  is  the  true  and  genuine  signature  of 
such  officer.  Such  report  shall  exhibit  in  detail  and  under  appro- 
priate heads  the  resources  and  liabilities  of  such  bank  at  the  close  of 
business  on  any  past  date  specified  by  the  Superintendent  of  Banks, 
and  shall  be  transmitted  to  the  Superintendent  of  Banks  within  ten 
(10)  days  after  [date]*  of  a  request  therefor  from  him,  and  shall 


*"Receipt"  changed  to  "date"  by  Act  of  August  14,  1920. 


BANKING  ACT  OF  1919.  21 

be  published  in  such  form  as  the  Superintendent  of  Banks  may 
prescribe,  within  ten  (10)  days  after  the  same  is  called  for,  in  a 
newspaper  published  in  the  city  or  town  where  such  bank  is 
located,  or  if  no  newspaper  is  published  in  such  city  or  town,  then 
in  the  county  in  which  such  bank  is  located,  and  if  no  newspaper 
is  published  in  the  county,  then  in  some  newspaper  having  a  gen- 
eral circulation  in  the  county,  such  publication  to  be  at  the  ex- 
pense of  the  bank,  and  proof  that  such  publication  has  been  made, 
in  such  form  as  may  be  required  by  the  Superintendent  of  Banks, 
shall  be  furnished  to  him  within  five  (5)  days  after  such  publica- 
tion is  made. 

This  is  a  substantial  reenactment  of  Code,  §  2288,  except  that 
under  that  section  the  report  was  required  to  be  "attested  by  the 
signature  of  at  least  two  of  the  directors,"  this  section  substituting 
the  certificate  for  the  simple  attestation.  Code,  §  2288,  is  in  sub- 
stantially the  same  language  as  the  National  Bank  Act,  §  5211, 
U.  S.  R.  S.,  as  amended;  §  9774,  U.  S.  Comp.  Stat.  By  the  Fed- 
eral Reserve  Act  of  December  23,  1913,  as  amended  by  the  Act 
of  June  21,  1917,  Congress  provided  that  State  banks  becoming 
members  of  the  Federal  Reserve  System  shall  make  reports  of 
their  condition  to  the  Federal  Reserve  Bank  of  which  they  become 
members,  not  less  than  three  such  reports  being  required  to  be 
made  annually  on  call  of  the  Federal  Reserve  Bank  on  dates  to 
be  fixed  by  the  Federal  Reserve  Board.  §  9792,  U.  S.  Comp.  Stat. 

§  41.     SEC.  2.     Special  Reports. 

The  Superintendent  of  Banks  shall  have  power  to  call  for  spe- 
cial reports  from  any  bank,  whenever  in  his  judgment  the  same  are 
necessary  in  order  to  obtain  a  full  and  complete  knowledge  of  its 
condition.  Such  reports  shall  be  made  on  forms  furnished  by  the 
Superintendent  of  Banks,  and  shall  be  verified  and  certified  as 
herein  provided  in  the  case  of  stated  reports. 

This  section  is  also  taken  from  Code,  §  2288. 

§42.      SEC.  3.     Call  for  Reports  Mailed  to  Banks. 

A  copy  of  each  call  made  by  the  Superintendent  of  Banks  for  a 
report  from  the  banks  under  the  supervision  of  said  Superintend- 
ent shall  be  mailed  to  each  bank,  and  such  mailing  shall  be  deemed 
legal  notice  of  such  call. 

This  is  substantially  a  reenactment  of  Code,  §  2309. 

§  43.     SEC.  4.     Dividends  'to  Be  Reported. 

In  addition  to  the  reports  required  in  the  preceding  sections, 
each  bank  shall  report  to  the  Superintendent  of  Banks  within  ten 


22  PARK'S  BANKING  LAW  otf  GEORGIA. 

( 10)  days  after  declaring,  and  at  least  ten  ( 10)  days  before  pay- 
ing, any  dividend,  the  amount  of  such  dividend  and  the  amount  of 
the  surplus  and  undivided  profits  in  excess  of  such  dividend.  Such 
report  shall  be  verified  and  certified  in  the  same  manner  as  it  is 
provided  herein  in  the  case  of  stated  reports  to  the  Superintendent 
of  Banks. 

This  section  follows  closely  the  National  Bank  Act,  §  5212, 
U.  S.  R.  S.;  §  9776,  U.  S.  Comp.  Stat.  It,  however,  requires  that 
the  report  shall  be  mailed  to  the  Superintendent  at  least  ten  days 
before  the  payment  of  the  dividend,  which  is  not  required  by  the 
National  Bank  Act.  By  the  Federal  Reserve  Act,  as  amended  by 
the  Act  of  June  21,  1917,  Congress  provided  that  State  banks  be- 
coming members  of  the  Federal  Reserve  System  shall  report  pay- 
ment of  dividends  to  the  Federal  Reserve  Bank  of  which  they  are 
members.  §  9792  (4),  U.  S.  Comp.  Stat. 

§  44.     Sue.  5.     Penalty  for  Failing  to  Report. 

Any  bank  which  fails  to  make  and  transmit  or  to  publish  any 
report  as  required  by  this  act  shall  be  subject  to  a  penalty  of 
$10.00  for  each  day  after  the  periods,  respectively,  herein  men- 
tioned that  it  delays  to  make  and  transmit  its  report  or  proof  of 
publication. 

Whenever  any  bank  delays  or  refuses  to  pay  the  penalty 
herein  imposed  for  the  failure  to  make  and  transmit  or  to  publish 
its  report,  the  Superintendent  of  Banks  is  hereby  authorized  to 
issue  an  execution  against  such  bank  for  the  amount  of  such 
penalty,  which  shall  be  enforced  in  like  manner  as  executions 
issued  by  the  Superior  Courts  of  this  State  upon  judgments. 

All  penalties  collected  shall  be  held  by  the  Superintendent  of 
Banks  as  other  funds  collected  and  deposited  to  the  credit  of  the 
Department  of  Banking. 

Under  Code,  §  2289,  the  penalty  for  failure  to  report  was  $50.00 
for  each  day,  and  the  State  Bank  Examiner  was  authorized  to 
maintain  an  action  in  the  name  of  the  State  against  the  delinquent 
bank  for  the  recovery  of  the  penalty.  The  penalty  imposed  on 
National  Banks  for  such  failure  is  $100.00  per  day.  §  5213,  U.  S. 
R.  S. ;  §  9777,  U.  S.  Comp.  Stat. 


BANKING  ACT  OF  1919.  23 

ARTICLE  V. 

Communications  from  Department  of  Banking. 

§  45.     SECTION  1.     Notice  of  Violation  of  Law. 

If  it  should  appear  to  the  Superintendent  of  Banks  that  any  bank 
has  violated  its  charter  or  any  law  of  the  State  or  any  order  or  regu- 
lation of  the  Department  of  Banking,  he  may,  by  an  order  under 
his  hand  and  official  seal,  addressed  to  such  bank,  direct  the  discon- 
tinuance of  such  violation,  or  if  it  should  appear  to  the  Superin- 
tendent that  any  such  bank  is  conducting  business  in  an  unsafe 
or  unauthorized  manner,  he  may  in  like  manner  direct  the  discon- 
tinuance of  such  unsafe  and  unauthorized  practices.  Such  order 
shall  be  read  at  a  meeting  of  the  directors  called  for  the  purpose, 
and  a  copy  thereof  shall  be  entered  upon  the  minutes  of  said 
board,  and  a  majority  of  the  board  of  directors,  over  their  own 
signatures,  indorsed  on  said  original  order,  shall  acknowledge  that 
the  same  has  been  read  at  a  meeting  of  the  board  and  entered 
upon  the  minutes  and  said  original  order  shall  be  forthwith  re- 
turned to  the  Superintendent  of  Banks. 

This  is  taken  substantially  from  §  56  of  the  New  York  act. 

§  46.     SEC.  2.     Communications  to  Be  Read  and  Entered  on 
Minutes. 

Each  official  communication  directed  by  the  Superintendent 
of  Banks  to  a  bank,  pertaining  to  an  investigation  or  exami- 
nation conducted  by  the  department,  or  to  the  affairs  of  such 
bank,  or  containing  orders,  suggestions,  or  recommendations  as 
to  the  conduct  of  the  business  thereof,  shall  be  submitted,  by 
the  officer  receiving  it,  to  the  board  of  directors  of  such  bank, 
at  the  next  meeting  of  such  board,  and  entered  on  the  minutes, 
and  written  acknowledgment  thereof  made  to  the  Superintendent 
of  Banks. 

This  follows  closely  §  132  of  the  New  York  act. 

§  47.     SEC.  3.     Removal  of  Officer  or  Employee. 

The  Superintendent  of  Banks  shall  have  the  right  to  require  the 
immediate  removal  from  office  of  any  officer  or  employee  of  any 
bank  who  shall  be  found  by  him  to  be  dishonest,  incompetent  or 
reckless  in  the  management  of  the  affairs  of  the  bank,  or  who  per- 


24  PARK'S  BANKING  LAW  of  GEORGIA. 

sistently  violates  the  laws  of  the  State  or  the  lawful  orders  of 
the  Superintendent. 

This  is  a  new  section,  giving  the  Superintendent  a  valuable  right. 


ARTICLE  VI. 

Impairment  of  Capital. 

§  48.     SECTION  1.     Transfer  of  Surplus. 

Whenever  the  Superintendent  of  Banks  shall  find  that  the  capi- 
tal stock  of  any  bank  has  become  impaired  or  reduced  as  much  as 
ten  per  cent,  of  its  par  value  from  losses  or  any  other  causes,  the 
Superintendent  of  Banks  shall  notify  and  require  such  bank  to 
make  good  its  capital  stock  so  impaired  or  reduced,  by  a  transfer, 
from  the  surplus  or  undivided  profits  thereof  to  the  capital  stock, 
of  a  sum  sufficient  to  make  good  such  impairment  or  reduction, 
and  upon  receipt  of  such  notice  such  bank  so  notified  shall  imme- 
diately make  the  transfer  so  required,  by  proper  corporate  action 
and  proper  entries  upon  its  books. 

By  Code,  §  2278,  it  was  provided  "whenever  by  reason  of  losses 
a  bank's  capital  stock  is  impaired,  the  shrinkage  in  the  capital  repre- 
sented by  such  losses  shall  be  charged  on  the  books  of  the  bank 
to  profit  and  loss,"  and  by  Code,  §  2291,  that  whenever  the  capital 
should  be  impaired  over  ten  per  cent,  the  State  Bank  Examiner 
should  notify  the  bank  to  make  good  the  impairment  within  ninety 
days.  This  section  is  intended  to  provide  against  a  bank  with  an 
impaired  capital  continuing  to  claim  a  surplus  or  undivided  profits, 
the  section  requiring  a  proper  adjustment  of  the  accounts  upon  the 
books  of  the  bank.  A  similar  requirement  is  made  by  §  56  of  the 
New  York  act. 

§  49.     SEC.  2.     Assessment  of  Stockholders. 

If  the  surplus  and  undivided  profits  of  such  bank  are  insufficient 
to  make  good  such  impairment,  the  Superintendent  of  Banks  shall 
notify  such  bank  to  make  good  the  impairment  within  sixty  (60) 
days,  by  an  assessment  upon  the  stockholders  thereof,  and  it  shall 
be  the  duty  of  the  officers  and  directors  of  the  bank  receiving  such 
notice  to  immediately  call  a  special  meeting  of  the  stockholders  for 
the  purpose  of  making  an  assessment  upon  its  stockholders  suffi- 
cient to  cover  the  impairment  of  the  capital,  payable  in  cash,  at 
which  meeting  such  assessment  shall  be  made.  Provided,  That 
such  bank  may  reduce  its  capital  to  the  extent  of  the  impairment 


BANKING  ACT  OF  1919.  25 

if  such  reduction  will  not  place  its  capital  below  the  amount  re- 
quired by  this  act. 

This  section  substantially  reenacts  Code,  §  2291,  reducing  the  time 
within  which  the  impairment  shall  be  made  good  from  ninety  to  sixty 
days.  The  original  section  followed  the  National  Bank  Act,  §  5205, 
U.  S.  R.  S. ;  §  9767,  U.  S.  Comp.  Stat. 

§  50.     SEX.  3.     Assessment,  How  Enforced. 

If  any  stockholders  should  refuse  or  neglect  to  pay  any  assess- 
ment which  may  be  levied  by  the  special  stockholders'  meeting  for 
the  purpose  of  making  good  any  impairment  or  reduction  of  capi- 
tal, within  thirty  (30)  days  after  such  assessment  shall  have  been 
levied,  the  directors  of  such  bank  shall  have  the  right  to  sell  to  the 
highest  bidder,  at  public  outcry,  for  cash,  a  sufficient  amount  of  the 
stock  of  such  stockholder  to  cover  the  assessment  after  giving  pre- 
vious notice  of  such  sale,  once  a  week,  for  two  (2)  weeks,  in  the 
newspaper  in  which  the  sheriff's  advertisements  of  the  county 
in  which  the  bank  is  located  are  published.  But  such  stock  shall 
in  no  event  be  sold  for  less  than  the  amount  of  the  assessment 
upon  the  same  and  the  necessary  costs  of  sale.  Out  of  the  pro- 
ceeds of  the  sale  of  said  stock,  the  directors  shall  pay  the  neces- 
sary costs  of  sale  and  the  amount  of  the  assessment  called  for 
thereon,  and  the  balance,  if  any,  shall  be  paid  to  the  person  or 
persons  whose  stock  has  been  sold,  or  to  the  holder  of  the  cer- 
tificate therefor  upon  the  surrender  of  such  certificate.  A  sale 
of  the  stock  as  herein  provided  shall  effect  an  absolute  cancella- 
tion of  the  outstanding  certificate  or  certificates  evidencing  the 
stock  so  sold,  and  shall  make  the  same  null  and  void,  and  the 
rights  of  any  and  all  holders  thereof  shall  terminate  and  a  new 
certificate,  or  certificates,  shall  be  issued  to  the  purchaser  or  pur- 
chasers of  such  stock,  free  from  all  liens  or  claims  whatsoever. 
The  bank  shall  also  have  the  right  to  sue  a  stockholder  failing  to 
pay  any  assessment  so  levied. 

When  any  stockholder  shall  have  pledged  or  hypothecated  any 
of  his  stock  and  shall  not  pay  any  assessment  levied  on  the  stock 
so  pledged,  for  any  reason,  it  shall  be  his  duty  to  give  to  the 
pledgee  notice,  by  registered  mail  at  least  five  (5)  days  before 
the  expiration  of  the  time  within  which  such  assessment  may  be 
paid,  of  the  levy  of  such  assessment  and  the  amount  thereof,  and 
of  the  fact  that  he  does  not  expect  or  intend  to  pay  the  same, 
giving  to  the  pledgee  the  privilege  of  paying  the  amount  of  the 
assessment  should  he  desire  to  do  so  for  his  own  protection. 


26  PARK'S  BANKING  LAW  OF  GEORGIA. 

No  means  was  provided  under  the  old  law  for  the  enforcement 
of  an  assessment  against  a  stockholder,  but  it  was  held  that  suit 
could  be  brought  for  the  recovery  of  the  amount  of  such  assess- 
ment. Commercial  Bank  of  Athens  v.  Blassingame,  147  Ga.  636. 
This  section  provides  an  additional  remedy  by  the  sale  of  the  stock, 
following  §  5205,  U.  S.  R.  S.,  as  amended  by  the  Act  of  June  30, 
1876 ;  §  9767,  U.  S.  Comp.  Stat. 


ARTICLE  VII. 

Taking  Possession  of  Bank  by  Superintendent. 

§  51.     SECTION  1.     Possession  May  Be  Taken,  When. 

Whenever  it  shall  appear  to  the  Superintendent  of  Banks  that 
any  bank  has  violated  its  charter  or  any  law  of  the  State,  or  any 
law  or  regulation  of  the  Department  of  Banking,  or  is  conducting 
business  in  an  unsafe  or  unauthorized  manner ;  or  that  its  capital 
is  impaired  more  than  ten  per  cent,  below  its  par  value  and  has 
not  been  made  good  under  the  requirement  of  the  Superintend- 
ent ;  or  when  any  bank  shall  refuse  to  submit  its  papers,  books, 
and  concerns  to  the  inspection  of  the  Superintendent,  or  any  Ex- 
aminer; or  when  any  officer  thereof  shall  refuse  to  be  examined 
on  oath  touching  the  affairs,  business,  or  concerns  of  any  bank; 
or  when  any  bank  shall  suspend  payment  of  its  obligations  or  shall 
fail  to  pay  any  final  judgment  from  which  no  further  appellate 
proceedings  will  lie  within  ten  (10)  days  after  the  rendition 
thereof ;  or  any  other  judgment  within  ten  days  after  the  expira- 
tion of  the  time  for  entering  appellate  proceedings ;  or  when 
from  any  examination  made  by  the  Superintendent,  or  any  Ex- 
aminer, the  Superintendent  shall  have  reason  to  conclude  that 
any  bank  is  in  an  unsafe  or  unsound  condition  to  transact  the 
business  for  which  it  was  organized,  or  that  it  is  unsafe  for  it  to 
continue  business;  or  when  any  bank  shall  neglect  or  refuse  to 
observe  any  lawful  order  of  the  Superintendent  directing  or  re- 
quiring the  doing  of  any  particular  matter  or  thing  required  to 
be  done  bylaw,  the  Superintendent  himself,  or  by  a  duly  authorized 
agent,  shall  forthwith  take  possession  of  all  the  assets  and  busi- 
ness of  such  bank  and  retain  possession  thereof  until  such  bank 
shall  be  authorized  by  him  to  resume  business,  or  its  affairs  be 
liquidated  as  herein  provided. 

Under  the  Bank  Bureau  Act  the  State  Bank  Examiner  had  no 
authority  of  his  own  motion  to  take  charge  of  a  bank,  but  was  re- 
quired when  his  examination  disclosed  that  a  bank  was  insolvent 


BANKING  ACT  OF  1919.  27 

to  report  the  condition  to  the  Governor,  and  when  ordered  by  the 
Governor,  to  take  charge.  His  possession  was  temporary  until 
an  examination  of  the  affairs  could  be  concluded,  when  if  the  fact 
of  insolvency  was  established,  the  Governor  was  required  to  in- 
struct the  Attorney-General  to  institute  proceedings  for  the  ap- 
pointment of  a  receiver.  Code,  §§  230»,  2306.  The  State  Bank 
Examiner  was  also  authorized,  where  any  officer  of  a  bank  re- 
fused to  submit  its  books,  papers,  or  assets  to  an  Examiner  or 
obstructed  or  interfered  with  him  in  the  discharge  of  his  duties 
or  refused  to  be  examined  on  oath  touching  the  affairs  of  the 
bank,  with  the  concurrence  of  the  Governor  and  through  the  At- 
torney-General, to  institute  proceedings  for  the  appointment  of  a 
receiver.  Code,  §  2292.  And  the  State  Bank  Examiner  was  like- 
wise authorized,  where  any  bank  refused  or  neglected  to  comply 
with  any  requirement  lawfully  made  by  him  for  a  period  of  thirty 
days,  to  institute  proceedings  to  forfeit  the  charter  of  such  bank. 
Code,  §  2347.  This  section  follows  the  method  outlined  in  the 
National  Bank  Act,  §§  5234,  5141,  5191,  5201,  5205,  5208,  U.  S. 
R.  S.,  and  the  Act  of  June  30,  1876,  as  amended;  §§  9821,  9678, 
9746,  9762,  9767,  9770,  U.  S.  Comp.  Stat.  The  Comptroller  of 
the  Currency,  under  these  sections  is  authorized  to  appoint  a 
receiver  for  a  national  bank,  such  receiver  under  the  direction  of 
the  Comptroller  being  authorized  to  wind  up  the  affairs  of  the 
bank.  The  Superintendent  of  Banks  of  New  York,  under  §  57 
of  that  law,  is  likewise  authorized  under  circumstances  similar 
to  those  given  in  this  section  to  take  charge  of  and  administer  the 
affairs  of  an  insolvent  bank.  Under  §  10  of  the  Alabama  law,  the 
Superintendent,  with  the  concurrence  of  the  Banking  Board  pro- 
vided for  by  that  act,  has  the  authority  to  take  charge  of  and  ad- 
minister an  insolvent  bank.  The  liquidation  of  such  bank  and  the 
authority  of  the  Superintendent  in  possession,  as  set  forth  in  the 
following  sections  of  this  Article,  is  a  combination  of  the  powers 
of  similar  officers  under  the  National  Bank  Act  and  the  New  York 
and  Alabama  statutes. 

§  52.     SEC.  2.     Directors  May  Surrender  Possession. 

Any  bank  may  place  its  assets  and  business  under  the  control  of 
the  Superintendent  of  Banks  by  posting  a  notice  on  the  front  door 
of  such  bank  indicating  that  the  bank  is  in  the  hands  of  the  Su- 
perintendent of  Banks,  which  notice  shall  be  signed  in  their  own 
handwriting  by  a  majority  of  the  directors  of  such  bank. 

This  is  substantially  a  reenactment  of  part  of  Code,  §  2290. 

§  53.     SEC.  3.     Effect  of  Notice  or  Possession. 

The  posting  of  such  notice  by  the  directors,  or  the  taking  posses- 
sion of  any  bank  by  the  Superintendent  of  Banks,  shall  be  sufficient 
to  place  all  assets  and  property  of  such  bank,  of  whatever  nature,in 
possession  of  the  Superintendent  of  Banks,  and  shall  operate  as  a 
bar  to  any  attachment  or  any  other  legal  proceedings  against  such 
bank  or  its  assets;  and  no  lien  shall  be  acquired  in  any  manner 
binding  or  affecting  any  of  the  assets  of  such  bank  after  the 
posting  of  such  notice  or  taking  possession  of  any  bank  by  the 


28  PARK'S  BANKING  LAW  OF  GEORGIA. 

Superintendent,  and  every  transfer  or  assignment  by  such  bank 
or  its  authority,  of  the  whole  or  any  part  of  its  assets,  after  the 
posting  of  such  notice  or  the  taking  possession  of  such  bank,  shall 
be  null  and  void. 

A  part  of  this  section  is  also  found  in  Code,  §  2290.  That  sec- 
tion, however,  only  provided  that  the  possession  of  the  State  Bank 
Examiner  should  operate  as  a  bar  to  attachment  proceedings,  while 
this  section  avoids  transfers  and  assignments  as  well  as  attachment 
proceedings  after  such  taking  possession. 

§  54.     SEC.  4.     No  Assignment  for  Creditors  Permitted. 

No  bank  shall  be  authorized  or  permitted  to  make  any  general 
assignment  for  the  benefit  of  its  creditors,  save  and  except  by  sur- 
rendering possession  of  its  assets  to  the  Superintendent  of  Banks 
as  herein  provided. 

This  section  repeals  Code,  §  2358,  which  permitted  a  bank  on  sur- 
rendering its  charter  or  its  use  thereof  to  make  an  assignment  for 
the  benefit  of  creditors. 

§  55.     SEC.  5.     Notice  of  Taking  Possession. 

On  taking  possession  of  the  assets  and  business  of  any  bank,  as 
in  this  act  authorized,  the  Superintendent  of  Banks  shall  forthwith 
give  notice  of  such  action  to  all  banks  and  other  persons  or  corpor- 
ations holding  or  in  possession  of  any  assets  of  such  bank.  No 
bank  or  other  person  or  corporation  shall  have  a  lien  or  charge  for 
any  payment,  advance,  or  clearance  thereafter  made,  or  liability 
thereafter  incurred,  against  any  of  the  assets  of  the  bank,  of 
whose  assets  and  business  the  Superintendent  shall  have  taken 
possession  as  aforesaid. 

This  is  taken  substantially  from  §  65  of  the  New  York  law. 
The  Alabama  act,  §  1-0,  contains  a  similar  provision  in  practically 
the  same  language.  The  National  Bank  Act,  §  5235,  U.  S.  R.  S.; 
§  9822,  U.  S.  Comp.  Stat.,  also  provides  for  notice  to  be  given  to 
creditors. 

§  56.     SEC.  6.     Business  Resumed,  How. 

After  the  Superintendent  of  Banks  has  so  taken  possession  of 
any  bank,  the  Superintendent  may  permit  such  bank  to  resume 
business  upon  such  conditions  as  may  be  approved  by  him. 

This  section  is  taken  substantially  from  §  61  of  the  New  York 
act,  and  is  quite  similar  to  §  10  of  the  Alabama  act. 


BANKING  ACT  OP  1919.  29 

§  57.     SEC.  7.     Collections  and  Sales,  How  Made. 

Upon  taking  possession  of  the  assets  and  business  of  any  bank, 
the  Superintendent  is  authorized  to  collect  all  moneys  due  to  such 
bank,  and  to  do  such  other  acts  as  are  necessary  to  conserve  its 
assets  and  business,  and  shall  proceed  to  liquidate  the  affairs 
thereof,  as  hereinafter  provided.  The  Superintendent  shall  col- 
lect all  debts  due  and  claims  belonging  to  such  bank,  and  by 
making  application  to  the  Superior  Court  of  the  county  in  which 
such  bank  is  located,  or  to  the  judge  thereof,  if  said  Superior 
Court  be  not  then  in  session,  may  procure  an  order  to  sell,  com- 
promise or  compound  any  bad  or  doubtful  debt  or  claim,  and  on 
like  order  the  Superintendent  may  sell  the  real  and  personal 
property  of  such  bank  on  such  terms  as  the  court,  or  the  judge 
thereof,  shall  direct,  but  on  any  such  court  proceedings  the  bank 
shall  be  made  a  party  by  a  proper  notice  issued  from  the  court, 
and  the  hearing  of  any  such  application  or  petition  by  the  Super- 
intendent may  be  had  at  any  time,  either  in  term  or  vacation,  after 
the  bank  has  had  five  (5)  days'  notice  of  such  application. 

This  section  follows  §  69  of  the  New  York  act.  Somewhat 
similar  duties  were  prescribed  for  the  receiver  of  a  bank  by  Code, 
§  2351.  The  National  Bank  Act,  as  amended  by  the  Act  of  March 
29,  1886,  §  9828  U.  S.  Comp.  Stat,  authorized  a  receiver  of  a 
national  bank  to  purchase  property  in  order  to  protect  his  trust. 
This  section,  which  gives  to  the  Superintendent  when  in  charge 
of  a  bank  authority  to  do  all  acts  necessary  to  conserve  its  assets 
and  business,  is  broad  enough  to  give  the  Superintendent  the  right 
to  purchase  property  where  necessary  in  order  to  so  "conserve 
the  assets." 

§  58.     SEC.  8.     Superintendent,  How  Enjoined. 

Whenever  any  bank  of  whost  assets  and  business  the  Superin- 
tendent has  taken  possession,  as  aforesaid,  shall  deem  itself  ag- 
grieved thereby,  it  may  at  any  time  within  ten  ( 10)  days  after  its 
assets  and  business  shall  have  been  taken  possession  of,  apply  to  the 
Superior  Court  of  the  county  in  which  its  office  shall  be  located,  or 
to  the  judge  of  such  court,  if  the  court  be  not  then  in  session,  to  en- 
join further  proceedings  by  the  Superintendent  to  show  cause  why 
further  proceedings  should  not  be  enjoined,  and  after  hearing  the 
allegations  and  proof  of  the  parties  and  determining  the  facts, 
may  dismiss  such  application  or  enjoin  the  Superintendent  from 
further  proceeding  a'nd  direct  the  said  Superintendent  to  sur- 
render such  business  and  assets  to  said  bank.  Such  application 
for  injunction  may  be  heard  at  any  time  after  three  (3)  days' 
notice  from  the  time  of  service  on  the  Superintendent,  in  the 


30  PARK'S  BANKING  LAW  OF  GEORGIA. 

discretion  of  the  court,  with  the  right  to  either  party  by  bill  of 
exception,  as  in  other  cases  of  applications  for  temporary  injunc- 
tion, to  carry  said  case  to  the  Supreme  Court  for  review. 

This  is  taken  substantially  from  §  10  of  the  Alabama  law.  A 
similar  provision  for  enjoining  the  Comptroller  of  the  Currency 
by  a  national  bank  is  made  by  §  5237,  U.  S.  R.  S. ;  §  9824,  U.  S. 
Comp.  Stat.  Construing  a  similar  section  (§  60)  of  the  New 
York  statute,  it  was  held :  The  power  of  the  Supreme  Court  to 
review  the  action  of  the  Superintendent  is  limited  to  ascertaining 
whether  or  not  there  has  been  an  abuse  of  discretion.  If  the  court 
finds  that  the  Superintendent's  action  was  justified,  it  can  not  di- 
rect him  to  restore  possession  upon  compliance  by  the  delinquent 
with  certain  conditions  specified  in  the  order.  Matter  of  Lunghino 
&  Sons,  176  App.  Div.  (N.  Y.)  285. 

§  59.     SEC.  9.     Superintendent  May  Appoint  Agent. 

The  Superintendent  may,  under  his  hand  and  official  seal,  appoint 
an  agent  to  assist  him  in  taking  possession  of,  liquidating  and  dis- 
tributing the  assets  of  any  bank  under  the  provisions  hereof,  the 
certificate  of  appointment  to  be  filed  in  the  office  of  the  Superin- 
tendent, and  a  certified  copy  thereof  delivered  to  such  agent. 
Such  agent  shall  receive  a  salary,  to  be  fixed  as  hereinafter  pro- 
vided for  the  time  he  is  actually  engaged  in  assisting  in  liquidat- 
ing the  affairs  of  the  bank.  The  Superintendent  may  authorize 
such  agent  to  perform  such  duties  connected  with  such  liquidation 
and  distribution  as  the  Superintendent  himself  could  in  person  do 
and  perform. 

This  follows  §  10  of  the  Alabama  act.  A  similar  provision  is 
made  by  §  62  of  the  New  York  act,  and  by  §  5234,  U.  S.  R.  S. ; 
§  9821,  U.  S.  Comp.  Stat. 

§  60.     SEC.  10.     Attorneys,  Accountants,  and  Assistants. 

The  Superintendent  may  employ  such  attorneys  and  procure  such 
expert  accountants  and  other  experts,  assistants  and  employees 
as  may  be  necessary  in  the  liquidation  and  distribution  of  the  as- 
sets of  such  bank,  and  may  retain  such  of  the  officers  or  employees 
of  such  bank  as  he  may  deem  necessary. 

Similar  provisions  are  made  by  §  10  of  the  Alabama  act  and  §  62 
of  the  New  York  act. 

§  61.     SEC.  11.     Bonds  of  Agent  and  Other  Assistants. 

The  Superintendent  shall  require  from  the  agent  appointed  by 
him,  and  from  such  of  the  assistants  as  will  have  charge  of  any 


BANKING  ACT  OF  1919.  31 

of  the  assets  of  the  bank,  such  security  for  the  faithful  discharge 
of  their  duties  as  he  may  deem  proper. 

A  similar  provision  is  made  by  §  10  of  the  Alabama  act,  §  62 
New  York  law,  and  §  5234,  U.  S.  R.  S. ;  §  9821,  U.  S.  Comp.  Stat. 

§  62.     SEC.  12.     Inventory  to  Be  Filed. 

Upon  taking  possession  of  the  assets  and  business  of  any  bank, 
the  Superintendent  shall  make  an  inventory  of  the  assets  thereof 
in  triplicate,  one  copy  to  be  filed  in  the  office  of  the  Superintendent 
and  one  copy  to  be  filed,  but  not  recorded,  in  the  office  of  the  clerk 
of  the  Superior  Court  of  the  county  in  which  the  bank  is  located, 
and  one  copy  to  be  kept  on  file  in  the  bank.  Such  inventories  shall 
be  open  to  inspection  during  regular  office  hours  of  such  offices, 
respectively. 

This  is  taken  substantially  from  §  66  of  the  New  York  law  and 
a  similar  provision  is  made  in  §  10  of  the  Alabama  law. 

§  63.     SEC.  13.     Notice  to  Creditors  and  Proof  of  Claims. 

The  Superintendent  shall  cause  notice  to  be  given  by  advertise- 
ment in  the  newspaper  in  which  the  sheriff's  advertisements  of 
the  county  in  which  the  bank  is  located  are  published,  and  in 
any  other  newspaper  which  in  the  opinion  of  the  Superintendent 
may  be  necessary  or  advisable,  once  a  week  for  four  weeks,  call- 
ing on  all  persons  who  may  have  claims  against  the  bank  to  pre- 
sent the  same  to  the  Superintendent  and  make  sworn  proof 
thereof,  filing  the  same  with  said  Superintendent  at  the  office 
of  the  bank,  and  within  any  time  to  be  specified  in  the  notice, 
not  less  than  ninety  (90)  days  from  the  date  of  the  first  publica- 
tion of  the  notice.  A  copy  of  this  notice  shall  be  mailed  to  all 
persons  whose  names  appear  as  creditors  upon  the  books  of  the 
bank. 

Similar  provisions  are  made  by  §  10  of  the  Alabama  law,  §  72 
of  the  New  York  law,  and  §  5235,  U.  S.  R.  S. ;  §  9822,  U.  S.  Comp. 
Stat. 

§  64.     SEC.  14.     Pass  Books  Called  In. 

The  Superintendent  shall  also  in  like  manner  notify  all  deposit- 
ors to  bring  in  their  pass  books  to  be  balanced  and  compared  with 
the  books  of  the  bank.  Deposits  appearing  on  the  books  of  the 
bank  which  agree  with  deposits  as  shown  by  the  pass  books  shall 
be  held  to  be  prima  facie  proven  claims  against  the  bank. 


32  PARK'S  BANKING  LAW  OF  GEORGIA. 

The  Alabama  act,  §  10,  provides  that  deposits  shown  on  the 
books  of  the  bank  are  prima  facie  proven  claims  against  the  bank. 
This  section  goes  further,  requiring  the  calling  in  of  pass  books  for 
balancing  and  comparison. 

§  65.     SEC.  15.     Superintendent  May  Reject  Claims. 

If  the  Superintendent  doubts  the  justice  and  validity  of  any  claim 
or  deposit,  he  may  reject  the  same,  and  serve  notice  of  such  rejec- 
tion upon  the  claimant  or  depositor,  either  personally  or  by  reg- 
istered mail,  and  an  affidavit  of  the  service  of  such  notice,  which 
shall  be  prima  facie  evidence  thereof,  shall  be  filed  in  the  office 
of  the  Superintendent.  Any  action  or  suit  upon  such  claim  so  re- 
jected must  be  brought  by  the  claimant  against  the  bank  in  the 
proper  court  of  the  county  in  which  the  bank  is  located  within 
ninety  (90)  days  after  such  service,  or  the  same  shall  be  barred. 

Similar  provisions  are  made  by  §  10  of  the  Alabama  law  and 
§  75  of  the  New  York  law. 

§  66.     SEC.  16.     Objections  to  Claims. 

Objections  to  any  claim  or  deposit  not  rejected  by  the  Superin- 
tendent may  be  made  by  any  party  interested  by  filing  a  copy  of 
such  objections  with  the  Superintendent,  and  the  Superintendent, 
after  investigation,  shall  either  allow  such  objections  and  reject  the 
claim  or  deposit,  or  present  such  objections  to  the  Superior  Court 
of  the  county  in  which  the  bank  is  located,  which  court  shall  cause 
an  issue  to  be  made  up  and  tried  at  the  first  term  thereafter  as  to 
whether  or  not  such  claim  or  deposit  should  be  allowed. 

This  follows  substantially  §  10  of  the  Alabama  law  and  §  74 
of  the  New  York  law. 

§  67.     SEC.  17.     List  of  Claims  Made  Up  and  Filed. 

Upon  the  expiration  of  the  time  fixed  for  the  presentation  of 
claims,  the  Superintendent  shall  make  in  triplicate  a  full  and  com- 
plete list  of  the  claims  presented  and  of  the  deposits  as  shown  by 
the  books  of  the  bank,  including  and  specifying  any  claims  or  de- 
posits which  have  been  rejected  by  him,  one  copy  to  be  filed  in  the 
office  of  the  Superintendent  and  one  copy  to  be  filed,  but  not  re- 
corded, in  the  office  of  the  clerk  of  the  Superior  Court  of  the 
county  in  which  the  bank  is  located,  and  one  copy  to  be  kept  of  file 
in  the  bank.  Such  inventories  and  list  of  claims  shall  be  open  to 
inspection  during  the  regular  office  hours  of  such  offices,  respec- 
tively. 


BANKING  ACT  OF  1919.  33 

This  section  follows  substantially  §  10  of  the  Alabama  Law  and 
§  73  of  the  New  York  law. 

§  68.     SEC.  18.     Claims  Presented  After  Time  Fixed. 

Claims  presented  to  the  Superintendent  after  the  expiration  of 
the  time  fixed  in  the  notice  to  creditors,  as  herein  provided,  shall 
be  entitled  after  they  have  been  allowed  by  the  Superintendent 
to  share  in  the  distribution  of  the  assets  of  the  bank  only  to  the 
extent  of  the  assets  undistributed  and  in  the  hands  of  the  Super- 
intendent at  the  time  such  claims  are  filed. 

This  follows  §  10  of  the  Alabama  law.  Under  the  New  York 
law,  §  72,  the  Superintendent  has  no  power  to  accept  a  claim  pre- 
sented after  the  time  fixed  in  the  notice  has  expired. 

g 

§  69.     SEC.  19.     Order  of  Paying  Debts. 

The  order  of  paying  off  the  debts  of  an  insolvent  bank  shall  be 
as  follows : 

1.  Debts  due  the  State  of  Georgia. 

2.  Debts  due  any  county,  district  or  municipality  of  the  State, 
including  unpaid  taxes. 

3.  Debts  due  the  United  States. 

4.  The  expenses  of  liquidation,  including  the  compensation  of 
agents  and  attorneys. 

5.  Debts  due  by  the  bank  as  trustee  or  other  fiduciary  and  other 
claims  of  like  character. 

6.  Judgments  and  debts  secured  by  lien  to  the  extent  of  the 
value  of  such  lien,  not  void  or  voidable  under  the  provisions  of 
this  act  or  the  law  of  Georgia;    judgment  and  lien  to  have  the 
force,  rank  and  dignity  prescribed  by  law. 

7.  Debts  due  to  depositors  and  other  contractual  liabilities  pro 
rata. 

8.  Unliquidated  claims  for  damages  and  the  like. 

Under  the  Act  of  1842,  Cobb's  Digest  119,  it  was  provided  that 
"where  the'  charter  of  a  bank  is  forfeited  and  the  bank  is  insolvent, 
the  order  of  paying  the  debts  shall  be  the  same  as  prescribed 
in  cases  of  administration  to  the  extent  applicable,  except  where 
special  preference  or  postponement  is  given  by  law."  This  act 
continued  until  the  present  law  went  into  effect  as  the  only  rule 
for  the  distribution  of  the  assets  of  an  insolvent  bank,  having  been 
reenacted  in  the  Bank  Bureau  Act,  Code,  §  2353.  The  rule  pre- 
scribed for  the  distribution  in  cases  of  administration  was  mani- 
festly inappropriate  where  the  assets  of  an  insolvent  bank  were 
to  be  distributed,  and  the  present  section  was  framed  with  a  view 
to  making  a  more  equitable  distribution. 

Under  the  old  law  it  was  held  that  the  State  was  entitled  to  prior- 
ity of  payment  where  both  State  and  individuals  were  creditors  of 
3 


34  PARK'S  BANKING  LAW  OF  GEORGIA. 

insolvent  bank.  Seay  v.  Bank  of  Rome,  66  Ga.  609  (4)  ;  see  also 
18/65  (7-9),  95;  131/750  (2),  (63  S.  E.  502);  134/163  (1),  (67 
S.  E.  803)  ;  139/54  (2)  (76  S.  E.  587).  But  county  was  not  so  en- 
titled to  priority.  County  of  Glynn  v.  Brunswick  T.  Co.,  101  Ga.  244; 
(28  S.  E.  604). 

§  70.     SEC.  20.     Assessment  of  Stockholders. 

Within  ninety  (90)  days  after  the  Superintendent  of  Banks  has 
taken  possession  of  the  assets  and  business  of  any  bank,  as  in  this 
act  authorized,  he  shall  make  a  careful  estimate  of  the  value  of 
the  cash  assets  of  said  bank  which  can  probably  be  converted 
into  cash  within  one  year  after  so  taking  possession  of  the  as- 
sets and  business  of  said  bank,  and  of  the  amount  of  such  cash 
assets  which  will  be  available  to  pay  depositors ;  and  he  shall 
immediately  thereupon  make  an  assessment  upon  the  stockhold- 
ers of  said  bank  sufficient,  when  added  to  the  cash  assets  so  avail- 
able for  depositors,  to  pay  the  said  depositors  in  full;  pro- 
vided that  such  assessment  shall  not  exceed  the  liability  of  stock- 
holders upon  their  said  stock.  Notice  of  such  assessment  shall 
be  given  by  mail  to  each  of  the  stockholders  of  said  bank,  and 
if  any  stockholder  so  notified  shall  refuse  or  neglect  to  pay  any 
such  assessment  within  thirty  (30)  days  after  the  levy  of  such 
assessment  and  notice  thereof,  the  Superintendent  of  Banks  shall 
issue  an  execution  against  such  stockholder  for  the  amount  of 
such  assessment,  which  shall  be  enforced  in  like  manner  as  exe- 
cutions issued  by  the  Superior  Courts  of  this  State  upon  judgments 
regularly  rendered  by  said  courts;  provided,  however,  that  any 
stockholder  shall  have  the  right  by  affidavit  of  illegality,  as  in 
cases  of  affidavits  of  illegality  to  other  executions,  to  contest 
his  liability  for  such  assessment,  but  not  the  correctness  of  the 
estimate  made  by  such  Superintendent  or  the  amount  of  such 
assessment,  which  estimate  and  the  amount  of  such  assessment 
shall  be  final  and  conclusive  upon  the  stockholders.  If  at  any 
time  prior  to  the  final  payment  of  all  the  indebtedness  of  such 
bank,  it  shall  appear  to  the  Superintendent  that  the  assessment 
made  by  him  is  insufficient  in  amount  to  pay  such  depositors  in 
full,  said  Superintendent  may  from  time  to  time  make  other 
assessments  not  in  excess  of  the  liability  of  the  stockholders  upon 
their  stock  which  shall  be  enforced  and  collected  in  like  manner. 

After  all  the  indebtedness  of  such  bank  is  paid  in  full,  the  re- 
maining assets  of  such  bank  shall  be  applied  first  to  reimbursing 
the  stockholders  who  have  paid  such  assessment  or  assessments, 
and  thereafter  pro  rata  to  all  the  stockholders. 


BANKING  ACT  OF  1919.  35 

Under  Code,  §  2356,  where  the  assets  of  the  bank  were  insuf- 
ficient to  pay  all  of  its  liabilities,  the  receiver  was  authorized  to 
bring  suit  against  the  stockholders  for  the  recovery  from  each  of 
his  appropriate  share  thereof,  and  it  was  further  provided  that  on 
failure  or  neglect  of  the  receiver  to  do  so  any  creditor  might  in- 
stitute such  suit  in  the  receiver's  name.  This  section  authorizing 
the  Superintendent  to  assess  the  stockholders  follows  §  5234,  U.  S. 
R.  S. ;  §  9821,  U.  S.  Comp.  Stat.,  and  is  a  distinct  improvement 
on  the  former  method.  The  Comptroller  of  the  Currency  can  only 
enforce  his  assessment  by  suit.  He  can  not  issue  an  execution  as 
the  Superintendent  is  authorized  to  do  by  this  section.  The  New 
York  statute,  §  80,  is  quite  similar  to  §  5234,  U.  S.  R.  S.;  §  9821, 
U.  S.  Comp.  Stat. 

§  71.     SEC.  21.     Dividends,  When  Paid. 

At  any  time  after  the  expiration  of  the  date  fixed  by  the  Super- 
intendent for  the  presentation  of  claims  against  the  bank,  and 
from  time  to  time  thereafter,  the  Superintendent  may,  out  of  the 
funds  remaining  in  his  hands  after  the  payment  of  expenses  and 
priorities,  declare  and  pay  dividends  to  the  depositors  and  other 
creditors  of  such  bank,  and  a  dividend  shall  be  declared  when  and 
as  often  as  the  funds  on  hand  subject  to  the  payment  of  dividends 
shall  be  sufficient  to  pay  ten  (10)  per  cent,  of  all  claims  entitled  to 
share  in  such  dividends. 

In  calculating  dividends,  all  disputed  claims  and  deposits  shall 
be  taken  into  account,  and  the  amount  of  dividends  upon  such 
disputed  claims  or  deposits  shall  be  held  by  the  Superintendent 
until  the  justice  and  validity  of  such  claims  or  deposits  shall  have 
been  finally  determined. 

This  section  follows  §  10  of  the  Alabama  law,  §  78  of  the  New 
York  law.  A  similar  provision  is  made  by  §  5236,  U.  S.  R.  S. ;  § 
9823,  U.  S.  Comp.  Stat. 

§  72.     Sue.  22.     Funds  to  Be  Deposited. 

All  funds  collected  by  the  Superintendent  shall  be  from  time 
to  time  deposited  in  such  bank  or  banks  as  may  be  selected  by  him, 
subject  to  the  check  of  the  Superintendent  of  Banks. 

This  section  follows  §  10  of  the  Alabama  law  and  §  70  of  the 
New  York  law.  Formerly  the  Comptroller  was  required  to  de- 
posit all  funds  of  insolvent  national  banks  in  his  hands  in  the 
United  States  Treasury,  but  by  an  amendment  to  §  5234,  U.  S. 
R.  S.,  approved  May  15,  1916,  §  9821,  U.  S.  Comp.  Stat.,  he  was 
authorized  to  deposit  such  funds  in  any  regular  Government  de- 
positary or  any  national  or  state  bank  in  the  city  in  which  the 
bank  was  located  or  in  a  city  as  adjacent  thereto  as  practicable. 


36  PARK'S  BANKING  LAW  of  GEORGIA. 

§   73.     SEC.   23.     Compensation   of   Agents,   Attorneys,   and 
Others,  How  Fixed. 

The  compensation  of  the  agents  appointed  by  the  Superin- 
tendent and  of  attorneys,  expert  accountants,  and  other  assist- 
ants, and  all  expenses  of  liquidation  and  distribution  of  a  bank 
whose  assets  and  business  shall  be  taken  possession  of  by  the 
Superintendent,  shall  be  fixed  by  the  Superintendent,  but  sub- 
ject to  be  approved  by  the  judge  of  the  Superior  Court  of 
the  county  in  which  the  bank  is  located,  on  notice  to  such 
bank.  Except  in  cases  of  emergency,  the  compensation  to  be 
paid  to  attorneys  and  expert  accountants  shall  be  fixed  and 
approved  before  services  are  rendered.  When  the  compensa- 
tion shall  have  been  so  fixed  and  approved  and  the  services 
rendered,  the  same  shall  be  paid  out  of  the  funds  of  such  bank 
in  the  hands  of  the  Superintendent,  and  shall  be  a  proper  charge 
and  4ien  on  the  assets  of  such  bank. 

This  section  follows  §  10  of  the  Alabama  law  and  §  63  of  the 
New  York  law.  Section  5238,  U.  S.  R.  S. ;  §  9825,  U.  S.  Comp.  Stat, 
also  provides  that  the  expense  of  receivership  shall  be  paid  out  of 
the  assets  before  distribution  thereof. 

§  74.     SEC.  24.     Unclaimed  Dividends  and  Deposits. 

Dividends  and  unclaimed  deposits  remaining  unpaid  in  the  hands 
of  the  Superintendent  for  six  (6)  months  after  the  order  for  final 
distribution,  shall  be  by  him  deposited  in  a  bank,  to  be  selected 
by  him,  at  the  best  rate  of  interest  obtainable,  to  the  credit  of 
the  Superintendent  and  his  successors  in  office,  in  trust  for  the 
several  depositors  in,  and  creditors  of,  the  liquidated  bank  and 
the  Superintendent  may  pay  over  the  money  so  held  by  him  to  the 
persons,  respectively,  entitled  thereto,  as  and  when  satisfactory 
evidence  of  their  right  to  the  same  is  furnished.  In  case  of 
doubtful  or  conflicting  claims,  the  Superintendent  may  require 
an  order  from  the  Superior  Court  of  the  county  in  which  the 
bank  is  located  authorizing  and  directing  the  payment  thereof. 
The  interest  earned  on  the  moneys  so  held  by  him  shall  be  applied 
toward  defraying  the  expenses  incurred  in  the  payment  and  dis- 
tribution of  such  unclaimed  deposits  or  dividends  to  the  depositors 
and  creditors  entitled  to.  receive  the  same.  The  balance  of  in- 
terest, if  any,  shall  be  deposited  and  held  as  other  funds  to  the 
credit  of  the  Department  of  Banking. 

This  section  follows  §  10  of  the  Alabama  law. 


BANKING  ACT  OF  1919.  37 

§  75.     SEC.  25.     Stockholders'  Meeting  to  Be  Called. 

Whenever  the  Superintendent  shall  have  paid  to  each  and  every 
depositor  and  creditor  of  such  bank  whose  claim  shall  have  been 
duly  proven  and  allowed,  the  full  amount  of  such  claim,  and 
shall  have  made  proper  provision  for  unclaimed  and  unpaid 
deposits  and  disputed  claims  and  deposits,  and  shall  have  paid 
all  the  expenses  of  liquidation,  the  Superintendent  shall  call  a 
meeting  of  the  stockholders  of  such  bank  by  giving  notice  thereof 
by  publication  once  a  week  for  four  weeks  in  the  newspaper 
in  which  the  sheriff's  advertisements  of  the  county  in  which 
the  bank  is  located  are  published,  and  by  mailing  a  copy  of  such 
notice  to  each  stockholder  addressed  to  him  at  his  address  as 
the  same  shall  appear  upon  the  books  of  the  bank;  and  at  such 
meeting  the  stockholders  shall  determine  whether  the  Super- 
intendent shall  continue  as  liquidator  and  shall  wind  up  the 
affairs  of  such  bank,  or  whether  an  agent  or  agents  shall  be 
elected  for  that  purpose,  and  in  so  determining,  the  stockhold- 
ers shall  vote  by  ballot  in  person  or  by  duly  executed  proxy, 
each  share  of  stock  entitling  the  holder  to  one  vote,  and  a  ma- 
jority vote  of  the  stock  shall  be  necessary  to  a  determination. 
In  case  it  is  determined  to  continue  the  liquidation  under  the 
Superintendent,  he  shall  complete  the  liquidation  of  the  affairs 
of  such  bank,  and,  after  paying  the  expenses  thereof,  and  reim- 
bursing the  stockholders  who  have  paid  any  assessments  upon 
their  stock  the  amounts  paid  by  them,  respectively,  he  shall  dis- 
tribute the  proceeds  among  the  stockholders  in  proportion  to  their 
several  holdings  of  stock. 

This  section  follows  §  10  of  the  Alabama  law  and  §  79  of  the  New 
York  law,  both  of  which  follow  the  Act  of  Congress  of  June  30, 
1876,  as  amended,  making  similar  provision  in  cases  of  national 
banks.  §  9827  U.  S.  Comp.  Stat. 

§  76.     SEC.  26.     Stockholders'  Agent,  Election,  Powers,  and 

Duties  of. 

In  case  it  is  determined*  to  appoint  an  agent  or  agents  to 
liquidate,  the  stockholders  shall  thereupon  elect  such  agent  or 
agents  by  ballot,  each  share  being  entitled  to  one  vote,  the 
majority  of  the  stock  present  and  voting  being  necessary  to 
a  choice.  Such  agent  or  agents  shall  execute  and  file  with  the 
Superintendent  a  bond  in  such  amount,  with  such  security  and 
in  such  form  as  shall  be  approved  by  the  Superintendent  con- 
ditioned for  the  faithful  performance  of  all  the  duties  of  his  or 


38  PARK'S  BANKING  LAW  OF  GEORGIA. 

their  trust,  so  conditioned  that  any  party  aggrieved  may  bring 
or  cause  to  be  brought  suits  on  said  bond,  and  thereupon  the 
Superintendent  shall  transfer  and  deliver  to  such  agent  or  agents 
all  the  undivided  and  uncollected  or  other  assets  of  said  bank 
then  remaining  in  his  hands,  and  upon  such  transfer  and  deliv- 
ery the  said  Superintendent  shall  be  discharged  from  any  and 
all  further  liability  to  such  bank  and  its  creditors.  Such  agent 
or  agents  shall  convert  the  assets  coming  into  his  or  their  hands 
into  cash,  and  shall  act  for  and  make  distribution  of  the  property 
of  said  bank,  as  is  herein  provided  in  case  of  distribution  by 
the  Superintendent,  the  expenses  of  such  liquidation  being-  subject 
to  the  control  and  approval  of  the  judge  of  the  Superior  Court 
of  the  county  in  which  the  bank  is  located. 

This  section  follows  §  10  of  the  Alabama  law  and  §  79  of  the 
New  York  Iaw4  both  of  which  follow  the  Act  of  Congress  of  June 
30,  1876,  as  amended,  making  similar  provision  in  cases  of  national 
banks.  §  9827  U.  S.  Comp.  Stat. 

§  77.     SEC.  27.     Successor  of  Agent,  How  Chosen. 

In  case  of  the  death,  removal,  or  refusal  to  act  of  any  agent  or 
agents  elected  by  the  stockholders,  the  stockholders,  upon  notice 
given  by  the  Superintendent,  as  is  herein  provided  in  case  of  the 
original  election  upon  proof  of  such  death,  removal,  or  refusal  to 
act  being  filed  with  said  Superintendent,  and  by  the  same  vote  as 
hereinbefore  provided  for,  shall  elect  a  successor,  who  shall  have 
the  same  powers  and  be  subject  to  the  same  liabilities  and  duties 
as  the  agent  or  agents  originally  elected. 

This  section  follows  §  10  of  the  Alabama  law,  which  follows  the 
Act  of  Congress  of  June  30,  1876,  as  amended,  making  similar  pro- 
vision in  case  of  a  national  bank.  §  9827  U.  S.  Comp.  Stat. 

§  78.     SEC.  28.     Superintendent  to  Report  Banks  Liquidated. 

The  Superintendent  shall  file  as  a  part  of  his  annual  report  to 
the  Governor  a  list  of  the  names  of  the  banks  so  taken  posses- 
sion of  and  liquidated,  and  the  sum  "of  unclaimed  and  unpaid  de- 
posits or  dividends  with  respect  to  each  of  them  respectively,  and 
where  such  unpaid  depositors  or  dividends  are  deposited. 

This  section  follows  §  10  of  the  Alabama  law  and  §  83  of  the  New 
York  law. 


BANKING  ACT  OF  1919.  39 

ARTICLE  VIII. 

Incorporation  of  Banks. 

§  79.     SECTION  1.     Application  for  Charter. 

Any  number  of  persons  not  less  than  five  (5)  may  form  a  cor- 
poration for  the  purpose  of  carrying  on  the  business  of  banking, 
by  filing  in  the  office  of  the  Secretary  of  State  an  application  in 
writing  signed  by  each  of  them,  in  which  they  shall  state : 

1.  The  name  by  which  such  bank  is  to  be  known. 

2.  The  particular  city,  town,  or  village,  where  its  office  is  to 
be  located. 

3.  The  amount  of   its  capital  stock  which  shall  not  be  less 
than  fifteen  thousand  dollars   ($15,000.00)   in  any  town  or  vil- 
lage incorporated  or  unincorporated,  whose  population  does  not 
exceed  one  thousand  (1,000)  according  to  the  last  preceding  cen- 
sus of  the  United  States,  and  not  less  than  twenty-five  thousand 
dollars  ($25,000.00)  in  any  city,  town,  or  village  whose  popula- 
tion exceeds  one  thousand   (1,000)   and  is  less  than  ten  thou- 
sand  (10,000),  and  not  less  than  fifty  thousand  dollars   ($50,- 
000.00)  in  any  city  or  town  whose  population  exceeds  ten  thou- 
sand (10,000). 

4.  The  number  of  shares  into  which  such  capital  stock  shall 
be  divided,  provided  the  par  value  of  each  share  of  stock  shall 
be  one  hundred  dollars  ($100.00). 

5.  The  purposes  and  nature  of  the  business  proposed  to  be 
conducted,   with   any   other   matters   which  they  may   deem  it 
desirable  to  state. 

6.  The  number  of  directors  of  the  bank,  which  shall  not  be 
less  than  three  (3)  nor  more  than  twenty-five  (25). 

Said  application  shall  be  filed  in  triplicate,  and  a  fee  of  fifty 
dollars  ($50.00)  shall  be  paid  to  the  Secretary  of  State  to  be  cov- 
ered by  him  into  the  Treasury  of  the  State,  on  filing  the  appli- 
cation, and  the  Secretary  of  State  shall  not  receive  said  applica- 
tion until  said  fee  shall  be  paid. 

[The  persons  filing  such  application  may  also  acquire  all  the 
rights,  powers,  privileges  and  immunities  and  be  subject  to  all 
the  liabilities  and  restrictions  conferred  and  imposed  upon  trust 
companies  of  Sections  2815  to  2821,  both  inclusive,  of  the  Civil 
Code  of  Georgia  of  1910  and  the  several  Acts  amendatory  thereof, 
and  in  addition  to  the  usual  banking  powers,  as  conferred  and  de- 


40  PARK'S  BANKING  LAW  of  GEORGIA. 

scribed  in  this  Act,  providing  such  applicants  shall  allege  that  at 
least  $100,000.00  of  capital  stock  has  been  subscribed  and  actually 
paid  in ;  provided  also  such  applicants  shall  pay  to  the  Secretary  of 
State  upon  filing  such  application  to  be  covered  by  him  into  the 
Treasury  of  the  State,  a  fee  of  $25.00  in  addition  to  the  fee  of 
$50.00  above  provided,  in  all  cases  where  trust  company  powers 
are  desired  as  above  set  forth.]* 

Under  the  amendment  to  Article  III,  §  7,  Paragraph  18,  of  the 
Constitution  ratified  in  1892  (Code,  §  6446),  "all  corporate  powers 
to  banking  companies  are  required  to  be  issued  and  granted  by  the 
Secretary  of  State  in  such  manner  as  shall  be  prescribed  by  law,  and 
if  in  the  event  the  Secretary  of  State  shall  be  disqualified,  then  the 
Legislature  shall  prescribe  by  general  laws  by  what  person  such 
charter  shall  be  granted."  Anticipating  the  ratification  of  this 
amendment,  a  general  law  for  the  incorporation  of  banks  by  the 
Secretary  of  State  was  adopted  in  1891  (Acts  1890-91,  p.  59). 
This  was  superseded  by  the  Act  of  1893  (Code,  §§  2266  et  seq.), 
which  act  remained  in  force  until  the  present  law. 

The  legislature  provided,  Code,  §  2263,  that  "in  case  the  Secretary 
of  State  is  disqualified  to  act  in  any  case,  the  application  shall  be 
filed  with  the  Comptroller  General,  who  shall  perform  all  the  duties 
prescribed  for  the  Secretary  of  State." 

Under  the  Act  of  1893  any  number  of  persons,  not  less  than  three, 
might  form  a  banking  corporation.  Code,  §  2262.  The  minimum 
capital  was  fixed  at  $25,000.00,  not  less  than  $15,000.00  of  which  was 
required  to  be  paid  in  in  cash  at  the  time  the  application  for  charter 
was  filed.  Code,  §  2269.  The  provision  for  graduating  the  amount 
of  capital  in  accordance  with  the  population  of  the  town  or  city  in 
which  the  bank  is  located  is  similar  to  the  requirement  of  §  5138, 
U.  S.  R.  S.,  as  amended  by  the  Act  of  March  14,  1900,  U.  S.  Comp. 
Stat.,  §  9675.  Alabama  also  graduates  the  required  capital  stock  by 
the  number  of  inhabitants  of  the  city  or  town  in  which  the  bank  is 
to  be  located.  §  18.  This  section,  with  the  exceptions  mentioned, 
follows  Code,  §  2262,  though  the  information  required  to  be  fur- 
nished is  somewhat  fuller. 

§  80.     Sue.  2.     Application  to  Be  Published. 

When  the  application  is  filed,  the  Secretary  of  State  shall  certify 
one  of  the  copies  thereof  and  deliver  the  same  to  the  applicants, 
and  the  same  shall  be  published  by  the  applicants  in  the  newspaper 
in  which  the  sheriff's  advertisements  of  the  county,  in  which  the 
bank  is  to  be  located,  are  published,  once  a  week  for  four  weeks. 

This  section  is  substantially  a  reenactment  of  Code,  §  2264. 

§   81.     SEC.   3.     Application    Referred   to   Superintendent   of 
,  Banks. 

Immediately  upon  the  filing  of  the  application,  the  Secretary  of 
State  shall  transmit  one  copy  thereof  to  the  Superintendent  of 
Banks  for  investigation  by  him. 

*Added  by  Act  of  August  14,  1920. 


BANKING  ACT.  OF  1919.  41 

Under  the  Act  of  1893,  no  investigation  of  the  application  for 
charter  was  required,  no  information  had  to  be  furnished  other 
than  that  contained  in  the  petition  and  the  certificate  of  its  publica- 
tion, and  the  Secretary  of  State  acted  in  a  purely  ministerial  ca- 
pacity in  issuing  the  charter.  The  requirement  for  investigation 
by  the  Superintendent  provided  for  in  this  and  the  following  sec- 
tion is  intended  to  insure  the  full  compliance  with  the  statutory 
requirements  as  to  the  payment  of  capital,  etc.,  and  is  a  proper  safe- 
guard thrown  around  the  incorporation. 

§  82.     SEC.  4.     Information  to  Be  Furnished  Superintendent 
by  Applicants. 

When  such  application  has  been  referred  to  the  Superintendent 
of  Banks  he  shall  call  upon  the  applicants  for  a  statement,  show- 
ing: 

1.  The  names  and  places  of  residence  of  the  subscribers  to 
the  stock  of  such  bank  and  the  number  of  shares  to  be  held 
by  each. 

2.  The  names  of  the  stockholders  who  shall  be  directors  for 
the  first  year  of  the  incorporation  of  said  bank. 

3.  How  and  when  it  is  proposed  that  the  capital  stock  shall 
be  paid  in. 

4.  When  it  is  proposed  that  such  bank  shall  commence  busi- 
ness. 

5.  Such  other  information  as  may  be  desired  by  the  Superin- 
tendent of  Banks. 

Which  statement  it  shall  be  the  duty  of  said  applicants  to  fur- 
nish upon  request  of  said  Superintendent. 

§  83.     SEC.  5.     Certificate  of  Publication. 

When  said  application  shall  have  been  published,  the  applicants 
may  apply  to  the  ordinary  of  the  county  in  which  the  proposed 
bank  shall  be  located  to  certify  the  fact  of  such  publication,  and 
the  ordinary  shall  certify  the  fact,  which  certificate  shall  be  filed 
by  the  applicants  in  the  office  of  the  Secretary  of  State. 

This  section  is  substantially  a  ree'nactment  of  Code,  §  2265. 

§  84.     SEC.  6.     Certificate  of  Incorporation  to  Be  Issued. 

When  the  certificate'  of  the  ordinary  to  the  fact  of  the  publica- 
tion of  the  application  shall  have  been  filed  by  the  applicants  in  the 
office  of  the  Secretary  of  State,  the  Secretary  of  State  shall 
issue  to  the  applicants,  their  associates,  and  successors,  a  certifi- 
cate of  incorporation  under  the  seal  of  the  State,  certifying 
that  the  applicants,  their  associates,  and  successors,  are  a  body 


42  PARK'S  BANKING  LAW  OF  GEORGIA. 

politic  and  corporate  under  the  name  and  style  designated  in 
the  application,  and  that  such  corporation  has  the  capacity  and 
powers  conferred,  and  is  subject  to  all  the  duties  and  liabilities 
imposed  by  law;  and  the  Secretary  of  State  shall  record  the 
application,  the  certificate  of  approval  of  the  Superintendent  of 
Banks,  the  certificate  of  the  ordinary  as  to  publication,  and  the 
certificate  of  incorporation,  in  the  order  named. 

This  section  is  also  substantially  a  reenactment  of  a  portion  of 
Code,  §  2265. 

§  85.     SEC.  7.     Payment  of  Capital. 

At  least  sixty  per  cent.  (60)  per  share  of  the  capital  stock  of 
every  bank,  and  in  no  event  less  than  fifteen  thousand  dollars 
($15,000.00),  shall  be  paid  in,  in  cash,  before  such  bank  shall  be 
authorized  to  commence  business,  and  the  remainder  of  the  capital 
stock  shall  be  paid  in  within  one  year,  in  such  installments  as  may 
be  approved  by  the  Superintendent  of  Banks,  and  the  payment  of 
each  installment  shall  be  certified  to  the  Superintendent  of  Banks 
under  oath  by  the  president  or  cashier  of  the  bank. 

Code,  §  2269,  provided  that  not  less  than  twenty  per  cent,  of 
the  required  capital  must  be  paid  in  before  filing  the  application 
with  the  Secretary  of  State,  and  in  no  event  less  than  $15,000.00. 
This  section  changes  the  requirement  so  as  to  provide  that  at  least 
sixty  per  cent,  per  share  must  be  paid  in,  and  in  no  event  less 
than  $15,000.00,  and  adds  that  the  remainder  of  the  capital  shall 
be  paid  in  within  one  year.  Under  the  former  law,  banks  were 
incorporated  with  a  minimum  capital  of  $25,000.00,  but  with  only 
$15,000.00  paid  in,  and  there  was  no  requirement  for  the  pay- 
ment of  the  balance  within  any  specified  time.  Many  banks  have 
continued  to  do  business  with  only  $15,000.00  paid  in  for  a  number 
of  years.  The  requirement  as  to  the  payment  of  the  capital  in 
installments  and  the  certification  of  eaeh  installment  to  the  Super- 
intendent of  Banks  is  quite  similar  to  that  of  §  5140,  U.  S.  R.  S. ; 
§  9677,  U.  S.  Comp.  Stat. 

§  86.     SEC.  8.^    Permit  to  Begin  Business. 

Before  any  bank  shall  transact  any  business  as  a  bank,  such  bank 
shall  file  with  the  Superintendent  of  Banks  a  request  for  a  permit 
to  commence  business.  No  bank  shall  transact  any  business  as  a 
bank  without  the  written  permit  of  the  Superintendent,  certifying 
that  such  bank  has  complied  with  all  the  requirements  of  law,  and 
is  authorized  to  transact  business  as  a  bank,  and  that  such  business 
can  be  safely  entrusted  to  it  which  permit  shall  be  recorded 
in  the  office  of  the  Superintendent  in  a  book  to  be  kept  by  him 
for  that  purpose;  and  a  certified  copy  thereof  under  the  hand 


BANKING  ACT  OF  1919.  43 

and  official  seal  of  the  Superintendent  shall  be  furnished  to  and 
kept  of  file  by  the  bank.  The  Superintendent,  before  issuing 
his  permit  to  any  bank  to  begin  business,  shall  make  an  examina- 
tion, or  cause  an  examination  to  be  made,  in  order  to  ascertain 
whether  the  requisite  capital  of  such  bank  shall  have  been  paid 
in,  in  cash.  The  Superintendent  shall  not  authorize  any  bank 
to  commence  business  until  it  shall  be  made  to  appear  to  his  satis- 
faction, from  such  examination,  that  the  amount  of  capital  herein 
required  has  been  subscribed  in  good  faith,  and  that  at  least  sixty 
per  cent.  (60)  per  share  of  the  authorized  capital  stock,  and  in 
no  event  less  tha.n  fifteen  thousand  dollars  ($15,000.00),  has 
been  paid  in,  in  cash,  and  that  provision  has  been  made,  for  col- 
lecting the  remaining  portion  of  the  capital  within  one  (1)  year. 
The  first  directors  shall  be  those  named  in  the  application  for 
charter  or  such  stockholders  as  may  be  substituted,  with  the  ap- 
proval of  the  superintendent,  for  any  therein  named. 

No  permit  to  begin  business  was  required  under  the  old  law. 
The  incorporators  on  obtaining  a  charter  from  the  Secretary  of 
State  could  begin  business  immediately  without  any  further  require- 
ment. This  provision  for  investigation  by  the  Superintendent  to 
ascertain  whether  the  capital  has  been  paid  in  and  the  other  re- 
quirements of  the  statute  complied  with  is  taken  in  substance  from 
the  National  Bank  Act,  §§  5168,  5169,  U.  S.  R.  S. ;  §§  9710,  9711, 
U.  S.  Comp.  Stat.  Similar  requirements  are  provided  under  the 
New  York  act,  §  24,  and  the  Alabama  act,  §  27. 

§  87.     SEC.  9.     Enforcing  Payment  of  Capital. 

Whenever  any  stockholder,  or  his  assignee,  shall  fail  to  pay  any 
installment  on  the  stock  when  the  same  is  required  to  be  paid,  the 
directors  of  such  bank  may  sell  the  stock  of  such  delinquent  stock - 
t  holder  at  public  sale,  after  giving  four  (4)  weeks'  previous  notice 
thereof  in  the  newspaper  in  which  the  sheriff's  advertisements  are 
published,  in  the  county  in  which  the  bank  is  located,  said  sale 
to  be  to  the  highest  bidder  for  cash,  provided  such  bid  shall 
not  be  less  than  the  amount  unpaid  on  such  stock,  with  the 
expense  of  advertisement  and  sale,  and  out  of  the  proceeds  the 
bank  shall  pay  the  expenses  of  sale  and  the  balance  due  on  the 
stock,  and  the  excess,  if  any,  shall  be  paid  to  the  delinquent 
stockholder.  If  no  bidder  can  be  found  who  will  pay  for  such 
stock  the  amount  due  thereon  to  the  bank,  together  with  the 
costs  of  advertisement  and  sale,  the  amount  previously  paid  by 
the  stockholder  shall  be  forfeited  to  the  bank,  and  such  stock 
shall  be  sold  by  the  directors  either  at  public  or  private  sale,  as 
they  shall  see  fit,  within  six  (6)  months  from  the  time  of  such 


44  PARK'S  BANKING  LAW  OF  GEORGIA. 

forfeiture,  and  if  not  sold,  it  shall  be  cancelled  and  deducted 
from  the  capital  stock  of  the  bank.  If  any  such  cancellation  or 
reduction  shall  reduce  the  capital  stock  of  the  bank  below  the 
minimum  capital  required  by  law  for  such  bank,  the  capital  shall 
within  thirty  (30)  days  from  the  date  of  such  cancellation  be  in- 
creased to  the  required  amount,  in  default  of  which  the  Superin- 
tendent of  Banks  shall  be  authorized  to  proceed  as  in  cases  where 
the  capital  stock  shall  have  become  impaired  by  reason  of  losses 
or  otherwise. 

A  sale  of  stock  as  herein  provided  shall  effect  an  absolute 
cancellation  of  the  outstanding  certificate  or  certificates  evidenc- 
ing the  stock  so  sold  and  shall  make  the  same  null  and  void,  and 
the  rights  of  any  and  all  holders  thereof  shall  terminate,  and  a 
new  certificate  or  certificates  shall  be  issued  to  the  purchaser  or 
purchasers  of  such  stock,  free  from  all  liens  and  claims  whatso- 
ever. 

The  remedies  of.  sale  or  forfeiture  herein  provided  shall  be 
cumulative  to  any  other  remedies  provided  by  law  for  the  collec-. 
tion  of  the  unpaid  balance  of  such  subscription. 

The  Act  of  1893  made  no  provision  for  the  collection  of  install- 
ments on  stock.  Such  collection  could  only  be  enforced  by  suit. 
The  section  follows  the  National  Bank  Act,  §  5141,  U.  S.  R.  S. ; 
§  9678,  U.  S.  Comp.  Stat. 

§  88.     SEC.  10.     Lien  on  Stock  for  Unpaid  Installment. 

Any  bank,  the  stock  of  which  has  not  been  fully  paid  for  by  the 
subscriber  or  subscribers,  shall  have  and  is  hereby  given  a  special 
lien  upon  said  stock,  which  lien  shall  not  be  divested  by  sale, 
transfer,  or  otherwise  until  all  installments  are  fully  paid  thereon. 
Any  certificate  of  stock'  issued  before  the  stock  shall  have  been 
paid  for  in  full  shall  show  upon  the  face  thereof  the  amount 
which  has  been  paid.  Save  and  except  for  unpaid  installments 
due  thereon  no  bank  shall  have  or  enforce,  by  by-law  or  other- 
wise, any  lien  on  its  stock  unless  the  same  shall  have  been  regu- 
larly pledged  and  the  stock  certificate  transferred  to  the  bank  as 
in  case  of  other  collateral. 

Code,  §  3375,  authorizes  a  corporation  by  its  by-laws  to  create 
a  lien  upon  its  shares  of  stock  in  favor  of  the  corporation.  This 
section  prohibits  the  creation  of  such  a  lien  by  a  bank,  the  bank 
being  given  a  lien  by  the  act  itself  for  unpaid  installments  of  the 
capital  stock  only. 


BANKING  ACT  OF  1919.  45 

ARTICLE  IX. 

Amendment  of  Bank  Charters. 

§  89.     SECTION  1.     What  Amendments  Allowed. 

Any  bank,  whether  incorporated  by  special  act  of  the  General 
Assembly  or  by  the  Secretary  of  State  under  the  general  law,  may 
have  its  charter  amended  so  as  to  change  its  corporate  name ;  or 
the  city,  town,  or  village  in  which  its  office  is  located ;  or  the 
amount  of  its  capital  stock ;  or  the  number  of  shares  into  which 
its  capital  stock  is  divided,  so  as  to  change  the  par  value  thereof 
to  one  hundred  dollars  each ;  [where  the  capital  stock  of  such 
bank  subscribed  and  paid  in  shall  be  not  less  than  One  Hundred 
Thousand  ($100,000.00)  Dollars,  so  as  to  acquire  all  the  rights, 
powers,  privileges  and  immunities  and  be  subject  to  all  the  liabili- 
ties and  restrictions  conferred  and  imposed  upon  trust  companies 
by  Sections  2815  to  282J,  both  inclusive,  of  the  Civil  Code  of  1910, 
and  the  several  Acts  amendatory  thereof  ;]*  and  any  bank  hereto- 
fore incorporated  by  special  act  of  the  General  Assembly  may 
have  its  special  charter  amended  so  as  to  incorporate  therein  any 
provision  of  this  act  or  any  amendment  thereto. 

Under  various  acts  of  the  Legislature,  Code,  §§  2197,  2201,  2268, 
and  2271,  four  separate  and  distinct  methods  of  amending  bank 
charters  were  provided.  Sometimes  the  same  amendment  could  be 
obtained  in  either  one  of  two  ways,  and  sometimes  where  it  was 
desired  to  obtain  more  than  one  amendment,  the  two  amendments 
could  only  be  obtained  by  different  methods.  This  Article  substi- 
tutes a  simple  uniform  method  for  all  amendments. 

§  90.     SEC.  2.     Application  for  Amendment. 

The  bank  desiring  such  amendment  shall  file  in  the  office  of  the 
Secretary  of  State  an  application  in  triplicate,  signed  with  its  cor- 
porate name  and  under  its  corporate  seal,  in  which  it  shall  state  the 
name  of  said  bank,  the  date  of  its  original  charter,  and  all  amend- 
ments thereto,  and  the  particular  amendment  or  amendments 
to  its  said  charter  it  desires ;  and  shall  pay  to  the  Secretary  of 
State  a  fee  of  twenty-five  ($25.00)  dollars,  to  be  covered  by 
him  into  the  Treasury  of  the  State.  Said  bank  shall  also  file 


*The  Secretary  of  State  having  refused  to  grant  an  amendment  to  a 
charter  conferring  trust  company  powers  upon  the  ground  that  the  Act  of 
1917  was  repealed  by  the  Banking  Act  of  1919,  this  provision  was  inserted 
by  the  Act  of  August  14,  1920. 


46  PARK'S  BANKING  LAW  OF  GEORGIA. 

with  said  application  a  certified  abstract  from  the  minutes  of 
the  stockholders  thereof  showing  that  the  application  for  the 
proposed  amendment  has  been  authorized  by  a  vote  of  a  ma- 
jority in  amount  of  the  entire  capital  stock  at  a  meeting  of  the 
stockholders,  called  for  the  purpose  of  acting  thereon,  by  a  reso- 
lution of  the  board  of  directors,  notice  of  which  meeting  shall 
have  been  mailed  to  each  stockholder,  or  in  case  of  death,  to  his 
legal  representatives  or  heirs  at  law,  addressed  to  his  last  known 
residence  at  least  ten  (10)  days  previous  to  the  date  of  said 
meeting,  provided,  however,  if  the  application  is  to  change  the  city, 
town  or  village  in  which  its  office  is  located,  then  the  certified 
abstract  from  the  minutes  shall  show  that  the  amendment  was 
authorized  by  the  unanimous  vote  of  the  stockholders  present 
at  said  meeting. 

The  method  here  provided  is  substantially  the  same  as  in  Code, 
§  2272. 

§  91.     SEC.  3.     Application  to  Be  Published. 

When  the  application  is  filed,  the  Secretary  of  State  shall  cer- 
tify one  of  the  copies  thereof  and  deliver  the  same  to  the  bank  and 
the  same  shall  be  published  by  the  bank  in  the  newspaper  in  which 
the  sheriff's  advertisements  of  the  county  in  which  the  bank  is  lo- 
cated, are  published,  once  a  week  for  four  (4)  weeks. 

This  substantially  reenacts  Code,  §  2273. 

§  92.     SEC.  4.     Application  Referred  to  Superintendent  of 
Banks. 

Immediately  upon  the  filing  of  the  application  for  amendment, 
the  Secretary  of  State  shall  transmit  one  copy  thereof  to  the  Su- 
perintendent of  Banks  for  investigation  by  him. 

The  requirements  for  referring  the  application  to  the  Superin- 
tendent for  investigation  and  the  examination  and  certificate  pro- 
vided for  in  the  succeeding  section  are  new.  Similar  requirements 
are  made  where  an  amendment  to  the  articles  of  association  of  a 
national  bank  is  sought.  Acts  of  July  12,  1882,  and  May  J,  1886. 
§§  9662,  9679,  9680,  9681,  U.  S.  Comp.  Stat. 

§  93.     SEC.  5.     Examination  by  and  Certificate  of  Superintend- 
ent. 

When  such  application  for  amendment  shall  have  been  re- 
ferred to  the  Superintendent  of  Banks,  the  said  Superintend- 
ent shall  immediately  investigate  either  through  himself  or 


BANKING  ACT  of  1919.  47 

some  person  appointed  by  him,  and  shall  satisfy  himself  that 
such  amendment  is  proper  and  has  been  duly  authorized  by 
proper  corporate  action,  and  in  case  said  application  is  for  the 
increase  of  the  capital  stock,  that  the  amount  of  such  addi- 
tional capital  has  been  paid  in,  in  cash,  except  where  surplus 
is  capitalized,  and  in  case  said  application  is  for  the  reduction  of 
the  capital  stock,  that  the  method  by  which  such  reduction  is  ac- 
complished is  proper  and  fair  to  all  the  stockholders  and  that 
the  capital  stock  is  not  reduced  below  the  amount  required  by 
law  for  such  bank,  and  that  all  the  requirements  of  law  have 
been  fulfilled.  If  so  satisfied  the  Superintendent  of  Banks  shall, 
within  thirty  (30)  days  after  the  application  for  amendment 
shall  have  been  filed  with  him  for  examination,  issue  under  his 
hand  and  official  seal  a  certificate  approving  the  amendment 
to  the  charter  of  such  bank,  and  shall  transmit  a  copy  of  such 
certificate  to  the  Secretary  of  State,  who  shall  enter  the  same 
of  record  in  his  office.  The  said  Superintendent  shall  also  keep 
of  file  a  duplicate  of  said  certificate  in  his  own  office.  If  the 
Superintendent  shall  not  be  satisfied  that  the  amendment  as 
proposed  is  expedient  and  desirable,  or  that  the  law  for  such 
cases  made  and  provided  has  been  fully  complied  with,  or,  if  the 
said  amendment  is  for  the  increase  of  the  capital  stock,  that  the 
said  increase  has  not  been  paid  in,  as  herein  provided,  he  shall, 
within  thirty  (30)  days  after  the  filing  of  the  copy  of  said  ap- 
plication for  amendment  with  him,  notify  the  Secretary  of  State 
that  he  refuses  to  approve  the  amendment  to  the  charter,  and  no 
amendment  shall  in  that  event  be  granted  by  the  Secretary  of 
State. 

§  94.     SEC.  6.     Certificate  of  Publication. 

When  the  application  to  amend  the  charter  shall  have  been  pub- 
lished, the  bank  may  apply  to  the  ordinary  of  the  county  in  which 
it  is  located  to  certify  the  fact  of  such  publication,  and  the 
ordinary  shall  certify  the  fact,  which  certificate  shall  be  filed  by 
the  bank  in  the  office  of  the  Secretary  of  State. 

This  section  is  substantially  a  reenactment  of  Code,  §  2274. 

§  95.     SEC.  7.     Certificate  of  Amendment  to  Be  Issued. 

When  the  certificate  of  the  ordinary  to  the  fact  of  the  publication 
of  the  application  for  amendment  shall  be  filed  by  the  bank  in 
the  office  of  the  Secretary  of  State,  and  the  certificate  of  the 


48  PARK'S  BANKING  LAW  OF  GEORGIA. 

Superintendent  of  Banks  approving  the  application  for  amend- 
ment shall  likewise  be  filed  with  the  Secretary  of  State,  the 
Secretary  of  State  shall  issue  to  the  bank  a  certificate,  under  the 
seal  of  the  State,  amending  the  charter  in  the  particulars  prayed 
for ;  and  the  Secretary  of  State  shall  record  the  application  for 
amendment,  the  certificate  of  approval  of  the  Superintendent  of 
Banks,  the  certificate  of  the  ordinary  as  to  the  publication,  and 
his  certificate  of  amendment,  in  the  order  named. 

A  similar  certificate  was  required  under  the  several  methods  of 
amendment  of  bank  charters  under  the  former  law.  Code,  §§  2198, 
2200,  2202,  2274. 

§  96.     SEC.  8.     Increase  of  Capital  from  Surplus  and  Undi- 
vided Profits. 

Any  bank  may  increase  its  capital  stock  from  its  surplus 
and  undivided  profits  where  its  charter  has  been  amended 
authorizing  such  increase  and  the  approval  of  the  Superintendent 
of  Banks  to  such  increase  from  the  surplus  and  profits  shall  have 
been  previously  obtained,  provided  that  no  increase  from  surplus 
and  profits  shall  be  made  which  will  reduce  the  unimpaired  sur- 
plus to  an  amount  less  than  twenty  (20)  per  cent,  of  the  capital 
stock. 

This  is  an  original  section,  its  purpose  while  authorizing  the 
transfer  of  surplus  to  capital  account  being  to  require  the  keeping 
intact  of  the  required  twenty  per  cent. 

§  97.     SEC.  9.     Increase  Offered  to  Stockholders. 

When  the  capital  stock  of  any  bank  shall  be  increased,  the  addi- 
tional stock  shall  be  offered  to  the  stockholders  of  record  at  the 
time  of  such  increase  pro  rata,  and  if  any  such  stock  shall  not  be 
subscribed  for  or  taken  by  such  original  stockholders,  the  same 
shall  then  be  offered  to  the  public  upon  such  terms  as  may  be  fixed 
by  the  board  of  directors  subject  to  the  approval  of  the  Superin- 
tendent of  Banks,  provided  that  no  stock  shall  ever  be  sold  for  less 
than  par  and  that  no  subscription  shall  be  payable  in  anything  ex- 
cept cash ;  [provided,  however,  that  the  payment  of  such  increase 
of  capital  stock  may  be  made  in  the  manner  set  forth  in  Section  7 
of  Article  8  (§85)  providing  for  the  payment  of  original  capital 
of  such  bank.]* 

There  was  nothing  in  the  old  law  which  preserved  to  the  stock- 
holders this  valuable  right.  By  regulation  of  the  Comptroller  of 
the  Currency,  national  banks  are  required  to  accord  to  their  share- 
holders a  similar  right. 


*Proviso  added  by  Act  of  August  14,  1920. 


BANKING  ACT  OF  1919.  49 

ARTICLE  X. 

Renewal  of  Bank  Charters. 

§  98.     SECTION  1.     Application  for  Renewal.  - 

Any  bank,  whether  incorporated  by  special  act  of  the  General 
Assembly,  or  by  the  Secretary  of  State  under  the  general  law  for 
the  incorporation  of  banks,  may  have  its  charter  renewed  and  its 
corporate  existence  extended  for  a  period  of  thirty  years  by  filing 
with  the  Secretary  of  State  at  any  time  within  six  (6)  months 
prior  to  the  expiration  of  its  charter  an  application  in  triplicate, 
signed  with  its  corporate  name  and  under  its  corporate  seal, 
1  in  which  it  shall  state  the  name  of  the  bank,  and  when  and  how  in- 
corporated, giving  the  date  of  its  original  charter  and  all  amend- 
ments thereto,  and  pray  for  a  renewal  of  its  charter,  and  upon 
filing  such  application,  it  shall  pay  to  the  Secretary  of  State  a  fee 
of  $25.00  to  be  covered  by  him  into  the  Treasury  of  the  State. 
Said  bank  shall  also  file  with  said  application  a  certified  abstract 
from  the  minutes  of  the  stockholders  thereof  showing  that  the 
application  for  renewal  of  its  charter  has  been  authorized  by  a 
vote  of  two-thirds  (%,)  in  amount  of  the  entire  capital  stock  of 
the  bank  at  a  meeting  of  the  stockholders,  called  for  the  purpose 
of  acting  thereon,  by  resolution  of  the  board  of  directors,  notice 
of  which  meeting  shall  have  been  mailed  to  each  stockholder,  and 
in  case  of  death  to  his  legal  representative,  or  heirs  at  law,  ad- 
dressed to  his  last  known  residence,  at  least  ten  (10)  days  previ- 
ous to  the  date  of  said  meeting. 

This  is  a  reenactment,  somewhat  amplified,  of  Code,  §  2193. 

§  99.     SEC.  2.     Application  to  Be  Published. 

When  said  application  for  renewal  of  charter  is  filed,  the  Secre- 
tary of  State  shall  certify  one  of  the  copies  thereof  and  deliver  the 
same  to  the  bank,  and  the  same  shall  be  published  once  a  week  for 
four  (4)  weeks,  in  the  newspaper  in  which  are  published  the 
sheriff's  advertisements  of  the  county  in  which  the  bank  is  lo- 
cated. 

There  was  no  requirement  for  the  publication  of  the  application 
to  renew  under  the  old  law,  but  as  a  renewal  is  practically  an 
amendment  to  the  charter,  the  same  method  as  is  provided  in  case 
of  amendment  is  here  provided  where  charters  are  sought  to  be 
renewed. 
4 


50  PARK'S  BANKING  LAW  OE  GEORGIA. 

§  100.     SEC.  3.     Application  Referred  to  the  Superintendent  of 
Banks. 

Immediately  upon  filing  the  application  for  renewal,  the  Secre- 
tary of  State  shall  transmit  one  copy  thereof  to  the  Superintend- 
ent of  Banks  for  investigation  by  him. 

There  was  no  requirement  for  an  investigation  before  charter 
was  renewed  under  the  old  law.  The  requirement  for  reference 
to  the  Superintendent  and  the  examination  and  certificate  provided 
for  in  the  next  section  are  analogous  to  the  provisions  of  the  Act  of 
July  12,  1882,  amending  the  National  Bank  Act,  §  9665,  U.  S.  Comp. 
Stat. 

§  101.     SEC.  4.     Examination  by  and  Certificate  of  the  Super- 
intendent. 

When  such  application  for  renewal  shall  have  been  re- 
ferred to  the  Superintendent  of  Banks,  said  Superintendent 
shall  make  or  cause  to  be  made  a  special  examination  to  de- 
termine the  condition  of  the  bank,  and  if,  from  such  exami- 
nation, or  otherwise,  it  shall  appear  to  him  that  said  bank  is 
in  a  safe  and  satisfactory  condition  and  has  complied  with  the 
requirements  of  the  law  and  that  such  renewal  of  the  charter 
is  proper  and  has  been  duly  authorized  by  proper  corporate 
action,  he  shall  within  thirty  (30)  days  after  the  application 
for  renewal  shall  have  been  filed  with  him  for  examination,  issue, 
under  his  hand  and  official  seal,  a  certificate  approving  the  re- 
newal of  the  charter  of  such  bank,  and  shall  transmit  a  copy  of 
such  certificate  of  approval  to  the  Secretary  of  State,  who  shall 
enter  the  same  of  record  in  his  office.  The  Superintendent  shall 
also  keep  of  file  a  duplicate  of  said  certificate  in  his  own  office. 
If  it  should  appear  to  the  Superintendent  of  Banks  from  the 
examination  herein  provided  for,  or  otherwise,  that  the  condi- 
tion of  said  bank  is  not  safe  or  satisfactory,  or  that  the  renewal  of 
its  charter  is  otherwise  inexpedient,  or  that  said  bank  has  failed 
to  comply  with  the  law,  or  that  the  application  for  renewal  has 
not  been  authorized  by  proper  corporate  action,  the  Superintend- 
ent shall  notify  the  Secretary  of  State  that  he  refuses  to  approve 
the  application  for  renewal  of  the  charter,  and  in  such  event  the 
charter  shall  not  be  renewed  by  the  Secretary  of  State. 

§  102.     SEC.  5.     Certificate  of  Publication. 

When  the  copy  of  the  application  for  the  renewal  of  the  charter 
shall  have  been  published  as  required  by  law,  the  bank  shall  apply 


BANKING  ACT  OF  1919.  51 

to  the  ordinary  of  the  county  in  which  it  is  located  to  certify  the 
fact  of  such  publication,  and  the  ordinary  shall  certify  the  fact, 
which  certificate  shall  be  filed  by  the  bank  in  the  office  of  the  Sec- 
retary of  State. 

§  103.     SEC.  6.     Certificate  of  Renewal  to  Be  Issued. 

When  the  certificate  of  the  ordinary  to  the  fact  of  the  publica- 
tion of  the  application  for  renewal  of  charter  shall  have  been  filed 
by  the  bank  in  the  office  of  the  Secretary  of  State,  and  the  certifi- 
cate of  the  Superintendent  of  Banks  approving  the  application  for 
renewal  shall  likewise  be  filed  with  the  Secretary  of  State,  the 
Secretary  of  State  shall  issue  to  the  bank  a  certificate  under  the 
seal  of  the  State,  renewing  its  charter  for  a  period  of  thirty  (30) 
years,  and  the  Secretary  of  State  shall  record  the  application  for 
renewal,  the  certificate  of  approval  of  the  Superintendent  of 
Banks,  the  certificate  of  the  ordinary  as  to  publication,  and  his 
certificate  of  renewal,  in  the  order  named. 

This  is  practically  a  reenactment  of  Code,  §  2194. 


ARTICLE  XI. 

Private  Bank  Converted  into  State  Bank. 

§  104.     SECTION  1.     Private  Bank,  How  Incorporated. 

Any  person,  firm,  or  voluntary  association  doing  a  banking  busi- 
ness in  this  State  may  convert  such  private  bank  into  a  bank  as 
herein  defined  by  complying  with  the  laws  in  regard  to  the  in- 
corporation of  banks  as  herein  prescribed,  and  in  the  event  of 
such  incorporation  the  capital  stock  may  be  paid  by  a  transfer 
of  the  assets  of  such  private  bank,  provided  the  live  assets  of  such 
bank  shall  exceed  its  liabilities  by  an  amount  equal  to  the  amount 
of  the  capital  stock,  such  assets  to  be  taken  at  the  true  value 
thereof,  and  the  Superintendent  of  Banks  shall  cause  an  examina- 
tion of  said  private  bank  to  be  made  and  its  assets  and  liabilities 
ascertained  before  authorizing  payment  of  the  capital  by  transfer 
of  such  assets  and  before  permitting  such  private  bank  to  begin 
business  as  an  incorporated  bank. 

This  Article  is  intended  to  afford  a  simple  and  easy  method  for 
the   incorporation   of   a  private  bank  without   injustice  to   its   de- 


52  PARK'S  BANKING  LAW  OF  GEORGIA. 

positors  or  other  creditors.  The  National  Bank  Act,  §  5154,  U.  S. 
R.  S.;  §  9694,  U.  S.  Comp.  Stat,  provided  for  the  conversion  of 
State  banks  into  national  banking  associations.  This  Article  was 
framed  on  the  general  plan  of  that  section,  the  object  being  to  en- 
courage private  banks,  which  operate  on  the  credit  of  individuals 
and  without  any  supervision,  to  become  regularly  incorporated  State 
institutions. 

§   105.     SEC.  2.    Effect  of  Incorporation. 

Upon  the  incorporation  of  any  private  bank  as  herein  provided 
all  the  assets  of  every  kind  and  character,  including  the  real  and 
personal  property,  and  choses  in  action,  belonging  to  such  bank, 
shall  be  deemed  to  be  transferred  to  and  vested  in  such  incorpo- 
rated bank  without  any  deed,  transfer,  or  assignment  being  exe- 
cuted, and  the  incorporated  bank  shall  hold  and  enjoy  the  same  in 
the  same  manner  and  to  the  same  extent  as  the  private  bank  held 
and  owned  the  same. 

§  106.     SEC.  3.     Rights  of  Creditors  and  Others. 

The  rights  of  the  creditors  and  depositors  of  such  private  bank 
shall  not  be  impaired  in  any  manner  by  such  incorporation,  nor 
shall  any  liability  or  obligation  for  the  payment  of  any  money  due 
or  to  become  due,  or  any  claim  or  demand  in  any  manner  or  for 
any  cause  existing  against  such  private  bank  be  in  any  manner  re- 
leased or  impaired  thereby,  and  all  the  rights,  obligations  and  re- 
lations of  all  the  parties,  creditors,  depositors  and  others  shall 
remain  unimpaired  by  such  incorporation.  But  such  incorporated 
bank  into  which  such  private  bank  shall  be  converted  shall  suc- 
ceed to  all  obligations,  trusts  and  liabilities  and  be  held  liable  to 
pay  and  discharge  all  such  debts  and  liabilities  and  to  perform  all 
such  trusts  in  the  same  manner  as  though  such  incorporated  bank 
had  itself  incurred  the  obligation  or  liability,  and  no  suit  or  other 
proceeding  then  pending  before  any  court  or  tribunal  in  which 
such  private  bank  is  a  party  shall  be  deemed  to  have  abated 
-or  been  discontinued  by  reason  of  any  such  incorporation  but 
the  same  may  be  prosecuted  to  final  judgment  in  the  same  manner 
as  if  such  private  bank  had  not  been  so  converted  and  the  in- 
corporated bank  may  be  substituted  in  place  of  the  private  bank 
by  order  of  the  court  in  which  such  action,  suit  or  proceeding 
may  be  pending.  Such  incorporated  bank  shall  likewise  be  subject 
to  be  sued  in  any  court  having  jurisdiction  upon  any  cause  of  ac- 
tion against  such  converted  private  bank,  in  the  same  manner 
as  if  such  cause  of  action  had  originated  against  such  incorporated 
bank. 


BANKING  ACT  OF  1919.  53 

• 

ARTICLE  XII. 

National  Bank  Converted  into  State  Bank. 

§  107.     SECTION  1.    National  Bank,  How  Incorporated  as  State 
Bank. 

Whenever  any  National  Banking  Association  organized  under 
the  Acts  of  Congress  and  located  in  this  State  shall,  under  the 
provisions  of  any  Act  of  Congress,  be  authorized  to  dissolve 
its  organization  as  such  national  banking  association,  and  shall 
have  taken  the  action  required  by  such  Act  of  Congress  to 
effect  such  dissolution,  a  majority  of  the  directors — in  no  event 
less  than  five  (5) — of  such  dissolved  association,  by  au- 
thority of  a  resolution  passed  by  not  less  than  two-thirds 
(%)  of  the  stockholders,  at  a  meeting  of  such  stockholders  called 
for  the  purpose  of  taking  such  action,  notice  of  which  shall  have 
been  given  to  each  stockholder  or  to  the  personal  representative 
or  heirs  at  law  of  any  deceased  stockholders,  addressed  to  his  last 
known  residence,  not  less  than  ten  (10)  days  previous  to  the 
date  of  such  meeting,  or  upon  the  authority  in  writing  of  the 
owners  of  two-thirds  (%)  of  the  capital  stock  of  such  associa- 
tion, may  apply  to  the  Secretary  of  State  to  become  incorporated 
under  the  terms  and  provisions  of  this  act,  and  upon  the  filing 
of  such  application  in  the  office  of  the  Secretary  of  State  and 
complying  with  the  law  in  regard  to  the  incorporation  of  banks 
as  herein  prescribed,  the  stockholders  of  such  national  banking 
association  may  become  incorporated  as  a  State  bank. 

The  National  Bank  Act,  §  5154,  U.  S.  R.  S.;  §  9694,  U.  S. 
Comp.  Stat.,  provided  for  the  conversion  of  State  banks  into  na- 
tional banking  associations.  This  Article  is  intended  to  provide  for 
the  converse,  authorizing  national  banks  to  become  State  banks 
and  providing  the  method  by  which  this  may  be  accomplished.  The 
method  is  substantially  the  same  as  that  provided  for  the  conversion 
of  a  State  bank  under  the  National  Bank  Act.  A  similar  provision 
is  found  in  the  New  York  law,  §  104,  this  section  following  that  in 
substance. 

§  108.     SEC.  2.     Capital  Stock,  How  Paid. 

In  the  event  of  the  incorporation  of  such  dissolved  national 
banking  association  as  a  State  bank  as  herein  provided,  the  capital 
stock  may  be  paid  by  a  transfer  of  the  assets  of  such  dissolved  na- 
tional banking  association,  provided  the  live  assets  of  such  associa- 
tion shall  exceed  its  liabilities  by  an  amount  equal  to  the  amount  of 


54  PARK'S  BANKING  LAW  OF  GEORGIA. 

• 

the  capital  stock,  such  assets  to  be  taken  at  the  true  value  thereof, 
and  the  Superintendent  of  Banks  shall  cause  an  examination  of 
such  dissolved  national  banking  association  to  be  made  and  its  as- 
sets and  liabilities  ascertained  before  authorizing  the  payment  of 
the  capital  by  a  transfer  of  such  assets  and  before  permitting  it  to 
begin  business  as  a  State  bank. 

§  109.     SEC.  3.     Effect  of  Such  Incorporation. 

Upon  the  incorporation  of  any  dissolved  national  banking  asso- 
ciation as  herein  provided  for,  all  the  assets  of  every  kind  and 
character,  including  the  real  and  personal  property,  and  choses  in 
action,  belonging  to  such  dissolved  association,  shall  immediately, 
by  operation  of  law,  and  without  any  conveyance  or  transfer,  be 
vested  in  and  become  the  property  of  such  State  ba'nk. 

The  directors  of  such  dissolved  association  at  the  time  of  its 
dissolution  shall  be  the  directors  of  the  bank  created  in  pursuance 
hereof  until  the  first  annual  election  of  directors  thereafter,  and 
shall  have  power  to  take  all  necessary  measures  to  perfect  its 
organization  and  adopt  such  regulations  concerning  its  business 
and  management  as  may  be  proper  and  just  and  consistent  with 
the  law. 

§  110.     SEC.  4.     Rights  of  Creditors  and  Others. 

The  rights  of  the  creditors  and.depositors  of  any  dissolved  na- 
tional banking  association  that  shall  be  so  converted  into  a  State 
bank  shall  not  be  impaired  in  any  manner  by  such  conversion,  nor 
shall  any  liability  or  obligation  for  the  payment  of  any  money  due 
or  to  become  due,  or  any  claim  or  demand  in  any  manner  or  for 
any  cause  existing  against  such  national  banking  association,  or 
against  any  stockholder  thereof,  be  in  any  manner  released  or 
impaired  thereby,  and  all  the  rights,  obligations  and  relations  of 
all  the  parties,  creditors,  depositors,  and  others  shall  remain 
unimpaired  by  such  conversion.  But  such  bank  into  which  the 
association  shall  be  converted  shall  succeed  to  all  obligations, 
trusts  and  liabilities  and  be  held  liable  to  pay  and  discharge  all 
such  debts  and  liabilities  and  to  perform  all  such  trusts  in  the 
same  manner  as  though  such  bank  into  which  the  association 
shall  have  become  converted  had  itself  incurred  the  obligation 
or  liability,  and  the  stockholders  of  the  national  banking  asso- 
ciation shall  continue  subject  to  all  the  liabilities,  claims  and 
demands  existing  against  them  as  such  at  or  before  such  con- 


v       BANKING  ACT  OF  1919.  55 

version;  and  no  suit,  action  or  other  proceeding  then  pending 
before  any  court  or  tribunal  in  which  any .  association  that  may 
be  so  converted  is  a  party  shall  be  deemed  to  have  abated  or  been 
discontinued  by  reason  of  any  such  conversion,  but  the  same  may 
be  prosecuted  to  final  judgment  in  the  same  manner  as  if  said 
conversion  had  not  taken  place,  or  the  bank  into  which  the  asso- 
ciation shall  have  been  converted  may  be  substituted  in  the  place 
of  any  association  so  converted  by  order  of  the  court  in  which 
such  action,  suit  or  proceeding  may  be  pending.  Such  State 
bank  shall  likewise  be  subject  to  be  sued  in  any  court  having 
jurisdiction  upon  any  cause  of  action  against  such  association 
in  the  same  manner  as  if  such  cause  of  action  had  originated 
against  such  State  bank. 


ARTICLE  XIII. 

Merger  or  Consolidation  of   Banks. 

§  111.     SECTION  1.     Merger  or  Consolidation,  How  Accom- 
plished. 

Any  two  or  more  banks  are  hereby  authorized  to  merge  one 
or  more  of  said  banks  into  another  of  them,  or  to  consolidate  in 
the  following  manner: 

The  respective  boards  of  directors  of  said  banks  may  enter 
into  and  make  an  agreement,  under  their  corporate  names  and 
seals,  for  the  merger  of  one  or  more  of  said  banks  into  another 
of  them,  or  for  the  consolidation  of  the  contracting  banks,  pre- 
scribing the  terms  and  conditions  thereof,  and  the  mode  of 
carrying  such  merger  or  consolidation  into  effect,  which  agree- 
ment shall  be  subject  to  the  approval  of  the  Superintendent  of 
Banks.  Said  agreement  shall  provide  the  name  that  such  bank 
shall  have,  upon  and  after  such  merger  or  consolidation,  which 
may  be  the  name  of  any  one  of  the  banks  merged  or  the  com- 
bined names  of  two  or  more  of  the  consolidated  banks,  or  such 
other  name  as  may  be  agreed  upon,  and  shall  name  the  persons, 
not  less  than  three  (3)  nor  more  than  twenty-five  (25),  who 
shall  constitute  the  board  of  directors  of  such  banks  after  the 
merger  or  consolidation  shall  have  taken  place,  and  until  a  new 
board  of  directors  shall  be  elected  by  the  stockholders,  and  shall 
provide  for  a  meeting  of  the  stockholders  of  the  merged  or 


56  PARK'S  BANKING  LAW  of  GEORGIA. 

consolidated  banks  within  thirty  (30)  days  after  the  merger  or 
consolidation,  to  elect  such  board  of  directors,  with  such  tem- 
porary provisions  for  conducting  the  affairs  of  the  merged  or 
consolidated  banks  meanwhile,  as  shall  be  agreed  upon. 

The  Bank  Bureau  Act,  Code,  §  2303,  provided  that  "A  bank, 
which  is  in  good  faith  winding  up  its  business  for  the  purpose  of 
consolidating  with  some  other  bank,  may  transfer  its  assets  and 
liabilities  to  the  bank  with  which  it  is  in  process  of  consolidation, 
but  no  such  consolidation  of  banks  shall  be  made  without  the 
consent  of  two-thirds  of  the  stock  of  each  bank,  and  not  then 
to  defeat  or  defraud  any  of  the  creditors  in  the  collection  of  their 
claims  against  said  banks,  or  either  of  them."  This  is  the  only 
authority  under  the  old  law  for  the  consolidation  or  merger  of 
banks.  It  will  be  seen  that  the  machinery  by  which  such  consoli- 
dation was  to  be  accomplished  was  not  provided.  This  Article  is 
intended  not  only  to  authorize  such  consolidation,  but  to  provide 
how  it  may  be  accomplished,  and  to  preserve  the  rights  of  credit- 
ors and  stockholders  of  the  consolidating  banks.  Congress,  by 
the  Act  of  November  7,  1918,  §  9696  (a,  b),  U.  S.  Comp.  Stat., 
provided  for  the  consolidation  of  national  banking  associations, 
the  provisions,  while  not  so  full,  being  quite  similar  to  those  of 
this  Article.  This  section  follows  closely  §§  487  and  488  of  the 
New  York  law.  On  September  29,  1919,  Alabama  adopted  a  similar 
statute. 

§  112.     SEC.  2.     Submission  of  Agreement  to  Stockholders. 

Such  agreement  for  the  merger  or  consolidation  of  two  or  more 
banks,  after  the  same  shall  have  been  approved  by  the  Superin- 
tendent of  Banks,  shall  be  submitted  to  the  stockholders,  respec- 
tively, of  each  of  such  banks  at  a  meeting  thereof  to  be  called  upon 
at  least  ten  (10)  days'  written  notice,  specifying  the  time,  place 
and  object  thereof,  addressed  to  each  stockholder  at  his  last 
known  postoffice  address,  and  if  such  agreement  shall  be  approved 
at  each  of  such  meetings  of  the  respective  stockholders,  sepa- 
rately or  at  any  adjournment  thereof,  by  the  affirmative  vote 
of  stockholders  owning  at  least  two-thirds  (%)  of  the  stock, 
the  same  shall  be  the  agreement  of  such  bank.  A  certified  copy 
of  the  proceedings  of  such  meetings,  respectively,  signed  by  the 
chairman  and  secretary  thereof  respectively,  and  under  the  seals 
of  the  banks,  respectively,  shall  be  evidence  of  the  holding  and 
action  of  such  meetings.  Such  certified  copies  shall  be  filed  in  the 
office  of  the  Superintendent  of  Banks,  and  thereupon  such  banks 
shall  be  merged  or  consolidated  as  specified  in  such  agreement, 
and  the  bank  into  which  the  other  or  others  are  merged,  or  the 
consolidated  bank,  as  the  case  may  be,  shall  thereafter  have  the 
new  name  specified  in  such  agreement  and  the  provisions  of  such 
agreement  shall  be  carried  into  effect  as  therein  provided. 

Similar  provision  is  made  in  the  New  York  law,  §  490. 


BANKING  ACT  OF  1919.  57 

§  113.     SEC.  3.     Notice  of  Merger  or  Consolidation. 

Notice  of  the  merger  or  consolidation  of  said  banks,  in  the  cor- 
porate names,  respectively,  of  the  banks  so  merged  or  consolidated, 
shall  be  published  once  a  week  for  four  (4)  weeks  in  the  newspa- 
per which  publishes  the  sheriff's  advertisements  of  the  county  in 
which  said  banks  so  merged  or  consolidated  are  located;  and  if 
the  banks  so  merged  or  consolidated  are  in  different  counties, 
such  notice  shall  be  published  in  such  newspaper  in  each  county. 
Such  notice  shall  give  the  name  of  the  banks  into  which  the 
other  or  others  shall  be  merged,  or  the  name  of  the  consolidated 
bank,  and  the  place  at  which  the  office  of  such  merged  or  consoli- 
dated bank  shall  be  located,  and  it  shall  state  that  such  merged 
or  consolidated  bank  has  taken  over  the  assets  of  the  banks, 
respectively,  entering  into  the  consolidation  or  merger  agree- 
ment, and  has  assumed  the  liabilities  of  such  banks,  including 
the  liability  to  depositors. 

§  114.     SEC.  4.     Surrender  of  Original  and  Issue  of  New  Cer- 
tificates of  Stock. 

The  bank  into  which  the  other  or  others  have  been  merged, 
or  the  consolidated  bank  as  the  case  may  be,  shall  have  the  right 
to  require  the  return  of  the  original  certificates  of  stock  held  by 
each  stockholder  in  each  or  either  of  the  banks,  and  in  lieu  thereof 
to  issue  new  certificates  for  such  number  of  shares  of  the  bank 
into  which  the  other  shall  have  been  merged,  or  of  the  consoli- 
dated bank,  as  under  the  agreement  of  merger  or  consolidation  the 
said  stockholders  may  be  entitled  to  receive. 

This  section  follows  the  New  York  law,  §  495. 

§  115.     SEC.  5.     Effect  of  Merger  or  Consolidation. 

Upon  the  merger  or  consolidation  of  any  banks  in  the  manner 
herein  provided,  all  and  singular,  the  rights,  franchise,  duties  and 
liabilities,  and  the  interests  of  the  bank  or  banks  so  merged  or 
consolidated  and  all  the  assets  of  every  kind  and  character,  in- 
cluding the  real  and  personal  property  and  choses  in  action  there- 
unto belonging,  shall  be  deemed  to  be  transferred  to  and  vested 
in  such  bank  into  which  the  other  or  others  has  been  merged  or 
in  the  consolidated  bank,  without  any  deed,  transfer  or  assign- 
ment, and  said  bank  shall  hold,  enjoy  and  be  subject  to  the  same 
in  the  same  manner  and  to  the  same  extent  as  the  merged  or  con- 


58  PARK'S  BANKING  LAW  OF  GEORGIA. 

solidated  banks,  respectively,  had,  held,  owned,  enjoyed,  and  was 
subject  to  the  same. 

Similar  provision  is  made  in  the  New  York  law,  §  494. 

§  116.     SEC.  6.     Rights  of  Creditors  and  Others. 

The  rights  of  creditors  of  any  bank  that  shall  be  so  merged  or 
consolidated  shall  not  be  impaired  in  any  manner  by  any  such 
merger  or  consolidation;  nor  shall  any  liability  or  obligation  for 
the  payment  of  any  money  due  or  to  become  due,  or  any  claim 
or  demand  in  any  manner  or  for  any  cause  existing  against  such 
bank,  or  against  any  stockholder  thereof,  be  in  any  manner  re- 
leased or  impaired;  and  all  the  rights,  obligations  and  relations 
of  all  the  parties,  creditors,  depositors,  and  others  shall  remain 
unimpaired  by  such  merger  or  consolidation.  But  such  bank 
into  which  the  other  or  others  shall  be  merged,  or  the  consoli- 
dated bank,  as  the  case  may  be,  shall  succeed  to  all  obligations, 
trusts,  and  liabilities  and  be  held  liable  to  pay  and  discharge  all 
such  debts  and  liabilities  and  to  perform  all  such  trusts  in 
the  same  manner  as  though  such  bank  into  which  the  other  or 
others  shall  have  become  merged,  or  the  consolidated  bank  had 
itself  incurred  the  obligation  or  liability;  and  the  stockholders 
of  the  respective  banks  shall  continue  subject  to  all  the  liabili- 
ties, claims  and  demands,  existing  against  them  as  such  at  or  be- 
fore such  merger  or  consolidation ;  and  no  suit,  action,  or  other 
proceeding  then  pending  before  any  court  or  tribunal  in  which 
any  bank  that  may  be  merged  or  consolidated  is  a  party  shall 
be  deemed  to  have  abated  or  been  discontinued  by  reason  of 
any  such  merger,  but  the  same  may  be  prosecuted  to  final  judg- 
ment in  the  same  manner  as  if  said  bank  had  not  entered  into 
said  agreement,  or  the  bank  into  which  the  others  shall  have 
been  merged,  or  the  consolidated  bank,  as  the  case  "may  be,  may 
be  substituted  in  the  place  of  any  bank  so  merged  or  consoli- 
dated by  order  of  the  court  in  which  such  action,  suit  or  pro- 
ceeding may  be  pending.  Such  bank  into  which  the  other  or 
others  have  been  so  merged,  or  the  consolidated  bank,  shall  be 
subject  to  be  sued  in  any  court  having  jurisdiction,  upon  any 
cause  of  action  against  any  of  the  banks  so  merged  or  consoli- 
dated, in  the  same  manner  as  if  such  cause  of  action  had  origi- 
nated against  such  bank  into  which  the  other  or  others  have  been 
merged  or  against  such  consolidated  bank. 

Similar  provision  is  made  in  the  New  York  law,  §  494. 


BANKING  ACT  OF  1919.  59 

ARTICLE  XIV. 

Voluntary  Liquidation  and  Dissolution. 

§    117.     SECTION    1.     Two-Thirds   Vote   of   Stockholders  Re- 
quired. 

Any  bank  may  go  into  voluntary  liquidation  and  be  closed,  and 
may  surrender  its  charter  and  franchise  as  a  corporation  to  the 
State  by  the  affirmative  vote  of  its  stockholders  owning  two- 
thirds  of  its  stock,  such  vote  to  be  taken  at  a  meeting  of  the 
stockholders  duly  called  by  resolution  of  the  board  of  directors, 
written  notice  of  which,  stating  the  purpose  of  the  meeting, 
shall  have  been  mailed  to  each  stockholder,  or  in  case  of  death 
to  his  legal  representative  or  heirs  at  law,  addressed  to  his  last 
known  residence  at  least  ten  (10)  days  previous  to  the  date  of 
said  meeting. 

The  old  law  made  no  provision  for  voluntary  liquidation.  Under 
§  5220,  U.  S.  R.  S. ;  §  9806,  U.  S.  Comp.  Stat.,  a  national  bank  may 
go  into  liquidation  by  a  two-thirds  vote  of  its  stock. 

The  New  York  law,  §  486,  authorizes  voluntary  liquidation  and 
dissolution,  the  method  being  quite  similar  to  that  prescribed  in  this 
Article.  Alabama  adopted  a  similar  statute  September  30,  1919. 

§  118.     Sue.  2.     Approval  of  Superintendent. 

Whenever  stockholders  shall  by  such  vote  at  a  meeting  regu- 
larly held  for  the  purpose,  notice  of  which  shall  have  been  given 
as  herein  provided,  decide  to  liquidate  said  bank,  a  certified  copy 
of  all  the  proceedings  of  the  meeting  at  which  said  action  shall 
have  been  taken,  verified  by  the  oath  of  the  president  and  cashier, 
shall  be  transmitted  to  the  Superintendent  of  Banks  for  his  ap- 
proval. If  the  Superintendent  of  Banks  shall  approve  the  same, 
he  shall  issue  to  the  said  bank,  under  his  hand  and  official  seal,  a 
permit  for  such  purpose.  No  such  permit  shall  be  issued  by  the 
Superintendent  of  Banks  until  said  Superintendent  shall  be  satis- 
fied that  provision  has  been  made  by  such  bank  to  satisfy  and 
pay  off  all  depositors  and  all  other  creditors  of  such  bank.  If 
not  satisfied,  the  Superintendent  shall  refuse  to  issue  a  permit 
and  shall  be  authorized  to  take  possession  of  said  bank  and  its 
assets  and  business  and  hold  the  same  and  liquidate  said  bank  in 
the  manner  in  this  act  provided. 

This  section  is  in  line  with  the  general  scheme  of  the  act,  to  give 
the  Superintendent  direct  control  over  every  step  in  the  life  of  a 


60  PARK'S  BANKING  LAW  OF  GEORGIA. 

bank  from  its  initial  organization  until  its  final  liquidation  by  what- 
ever process  accomplished. 

§  119.     SEC.  3.     Notice  of  Liquidation. 

In  the  event  the  Superintendent  of  Banks  shall  approve  the 
voluntary  liquidation  of  said  bank,  the  directors  shall  cause  to  be 
published  in  the  newspaper  in  which  the  sheriff's  advertisements 
of  the  county  in  which  the  bank  is  located,  a  notice  that  the  bank 
is  closing  up  its  affairs  and  going  into  liquidation,  and  notifying 
its  depositors  to  withdraw  their  deposits  and  its  creditors  to  pre- 
sent their  claims  for  payment. 

A  similar  provision  is  contained  in  §  5221,  U.  S.  R  S. ;  §  9808, 
U.  S.  Comp.  Stat. 

§  120.     SEC.  4.     Examination  of  and  Reports  by  Liquidating 
Bank. 

When  any  bank  shall  be  in  process  of  voluntary  liquidation,  it 
shall  be  subject  to  examination  by  the  Superintendent  of  Banks 
and  shall  furnish  such  reports  from  time  to  time  as  may  be  called 
for  by  the  Superintendent. 

The  regulations  promulgated  by  the  Comptroller  of  the  Currency 
make  similar  requirements  of  national  banks  in  voluntary  liquida- 
tion. 

§  121.     SEC.  5.     Unpaid  Deposits  and  Claims  to  Be  Provided 
for. 

After  paying  all  the  creditors  of  said  bank  and  all  depositors 
whose  claims  have  been  presented  and  allowed,  the  directors 
shall  cause  to  be  deposited  in  such  bank  as  may  be  designated 
by  the  Superintendent  of  Banks,  to  the  credit  of  the  Superin- 
tendent, an  amount  sufficient  to  cover  all  unpaid  and  unclaimed 
deposits,  and  all  other  claims  against  said  bank  which  for  any 
reason  may  not  have  been  paid.  Such  sum  shall  be  held  by  the 
Superintendent  in  the  same  manner  as  deposits  made  by  him  to 
cover  unpaid  deposits  of  banks  liquidated  by  him  or  under  his 
direction. 

§  122.     SEC.  6.    Remaining  Assets  Distributed  to  Stockholders. 

After  paying  all  debts  against  said  bank  and  all  amounts  due 
to  the  depositors  thereof  and  after  depositing  a  sum  sufficient 
to  pay  any  unclaimed  or  unpaid  deposits  or  other  valid  claims 
as  herein  provided,  and  after  deducting  the  expenses  of  liquida- 


BANKING  ACT  OF  1919.  61 

tion,  the  remaining  assets  shall  be  distributed  pro  rata  among 
the  stockholders  in  proportion  to  the  number  of  shares  held  by 
each  respectively. 

§  123.     SEC.  7.     Surrender  of  Charter. 

When  all  amounts  due  by  said  bank  shall  have  been  paid  or  pro- 
vided for  as  herein  provided  and  all  remaining  assets  shall  have 
been  distributed  to  the  stockholders,  the  bank  may  file  in  the 
office  of  the  Secretary  of  State  an  application,  in  triplicate,  signed 
with  its  corporate  name  and  under  its  corporate  seal,  in  which 
it  shall  state  the  name  of  the  bank,  the  place  where  it  is  located, 
the  date  of  its  original  charter,  and  of  all  amendments  thereto, 
and  the  fact  that  all  debts  due  by  the  bank  have  been  paid  or 
provided  for,  and  that  its  assets  have  been  distributed  to  its 
stockholders,  and  that  it  desired  to  surrender  its  charter  and 
franchise  to  the  State.  On  filing  such  application,  the  bank 
shall  pay  to  the  Secretary  of  State  a  fee  of  $25.00  to  be  covered 
by  him  into  the  State  Treasury.  Said  bank  shall  also  file  with 
said  application  a  certified  copy  of  the  resolution  of  the  stock- 
holders approving  the"  surrendering  of  such  charter  and  fran- 
chises, which  resolution  must  be  adopted  by  an  affirmative  vote 
of  not  less  than  two-thirds  (%)  of  all  the  stockholders  at  a  meet- 
ing called  for  the  purpose  of  taking  such  action  as  herein  pro- 
vided. 

A  corporation  can  not  surrender  its  charter  and  franchise  except 
by  express  authority  and  permission  of  the  General  Assembly. 
Davis  v.  White,  134  Ga.  274.  By  the  Act  of  1910,  Code,  §  2823  (b), 
such  authority  was  granted  to  corporations  organized  under  charters 
granted  by  the  Superior  Courts.  This  and  the  following  sections 
grant  a  like  authority  to  banks,  the  method  provided  following  in 
general  plan  that  of  the  Act  of  1910. 

§  124.     SEC.  8.     Application  to  Be  Published. 

When  the  said  application  to  surrender  the  charter  is  filed,  the 
Secretary  of  State  shall  certify  one  of  the  copies  thereof  and 
deliver  the  same  to  the  bank,  and  the  same  shall  be  published  by 
the  bank  in  trie  newspaper  in  which  the  sheriff's  advertisements 
of  the  county  in  which  the  bank  is  located  are  published,  once  a 
week  for  four  weeks. 


62  PARK'S  BANKING  LAW  OF  GEORGIA. 

§   125.     SEC.  9.     Application  Referred  to   Superintendent  of 
Banks. 

Immediately  upon  the  filing  of  the  application  to  surrender  the 
charter,  the  Secretary  of  State  shall  transmit  one  copy  thereof  to 
the  Superintendent  of  Banks  for  investigation  by  him. 

§   126.     SEC.   10.     Examination  by  and  Certificate  of  Super- 
intendent. 

When  such  application  to  surrender  charter  shall  have  been 
referred  to  the  Superintendent  of  Banks,  the  said  Superintendent 
shall  immediately  investigate  or  cause  an  investigation  to  be  made, 
and  shall  satisfy  himself  that  the  surrender  of  such  charter  and 
the  dissolution  of  such  bank  may  be  allowed  without  injustice 
to  any  stockholder,  or  to  any  person  or  corporation  having  any 
claim  or  demand  of  any  character  against  said  bank,  and  that  all 
assets  of  said  bank  have  been  distributed  and  all  depositors  and 
creditors  paid  or  properly  provided  for,  and  that  the  surrender 
of  the  charter  and  franchises  has  been  authorized  by  proper  cor- 
porate action,  and  that  all  requirements  of  law  have  been  com- 
plied with.  If  so  satisfied  the  Superintendent  of  Banks  shall 
within  thirty  (30)  days  after  the  application  for  surrender  of 
charter  shall  have  been  filed  with  him  for  examination,  issue 
under  his  hand  and  official  seal  a  certificate  approving  the  ap- 
plication, and  shall  transmit  a  copy  of  such  certificate  of  approval 
to  the  Secretary  of  State,  who  shall  enter  the  same  of  record 
in  his  office.  The  said  Superintendent  shall  also  keep  of  file  a 
duplicate  of  said  certificate  in  his  own  office.  If  the  Superin- 
tendent shall  not  be  satisfied  that  the  surrender  of  the  charter 
as  proposed  is  proper  and  expedient  or  that  the  law  for  such  cases 
made  and  provided  has  been  fully  complied  with,  he  shall  within 
thirty  (30)  days  after  the  filing  of  said  copy  with  him,  notify 
the  Secretary  of  State  that  he  refuses  to  approve  the  applica- 
tion, and  in  such  event  no  order  shall  be  granted  by  the  Secre- 
tary of  State  dissolving  the  bank,  or  authorizing  the  surrender 
of  its  charter. 

§  127.     SEC.  11.     Certificate  of  Publication. 

When  the  copy  of  the  application  to  surrender  the  charter  shall 
have  been  published  as  required  by  law  the  bank  may  apply  to 
the  ordinary  of  the  county  in  which  it  is  located  to  certify  the 
fact  of  such  publication,  and  the  ordinary  shall  certify  the  fact, 


BANKING  ACT  of  1919.  63 

which  certificate  shall  be  filed  by  the  bank  in  the  office  of  the 
Secretary  of  State. 

§  128.     SEC.  12.     Order  Dissolving  Bank. 

When  the  certificate  of  the  ordinary  to  the  fact  of  the  publi- 
cation of  the  application  to  surrender  the  charter  shall  be  filed 
by  the  bank  with  the  Secretary  of  State,  and  the  certificate  of  the 
Superintendent  of  Banks  approving  the  application  shall  likewise 
be  filed  with  the  Secretary  of  State,  the  Secretary  of  State  shall 
pass  an  order  under  the  seal  of  the  State  accepting  the  surrender 
of  the  charter  and  franchises  and  dissolving  the  bank,  and  the 
Secretary  of  State  shall  record  the  application,  the  certificate  of 
approval  of  the  Superintendent  of  Banks,  the  certificate  of  the 
ordinary  as  to  the  publication,  and  his  order  accepting  the  sur- 
render of  the  charter  and  franchises  and  dissolving  the  bank,  in 
the  order  named;  and  the  said  bank  shall  thereupon  be  finally 
dissolved  for  all  purposes  whatsoever. 


ARTICLE  XV. 

Forfeiture  of  Charter. 

§  129.     SECTION  1.     Causes  of  Forfeiture. 

Bank  charters  are  subject  to  forfeiture  on  the  same  general 
ground  as  are  those  of  other  corporations,  and  also : 

1.  For  the  violations  of  any  of  the  provisions  of  their  charters. 

2.  For  the  violation  of  any  obligation  imposed  by  law. 

3.  Whenever  it  is  demanded  by  specific  enactment. 

4.  For  refusal  or  neglect  for  a  period  of  thirty  (30)  days,  after 
the  written  order  of  the  Superintendent  of  Banks,  to  comply  with 
any  requirement  lawfully  made  upon  it  by  such  Superintendent. 

The  first  three  grounds  of  forfeiture  were  contained  in  Code, 
§  2349,  being  codified  from  the  Acts  of  1840  and  1842.  The  fourth 
ground  was  added  by  the  Bank  Bureau  Act  of  1907,  Code,  §  2347. 
The  franchise  of  a  national  bank  may  be  forfeited  upon  similar 
grounds,  §  5239,  U.  S.  R.  S. ;  §  9831,  U.  S.  Comp.  Stat. 

§  130.     SEC.  2.'    Proceedings  to  Forfeit. 

The  Superintendent  of  Banks  in  the  name  of  the  State  is  au- 
thorized to  institute  quo  warranto  or  other  appropriate  proceed- 


64  PARK'S  BANKING  LAW  OF  GEORGIA. 

ings  to  vacate  and  forfeit  the  charter  of  any  bank,  where  the 
bank  has  done  or  omitted  any  such  act  or  acts  as  under  the  law 
authorizes  a  forfeiture  of  its  charter. 

Under  the  old  law,  reeacted  by  the  Bank  Bureau  Act,  the  charter 
of  a  bank  could  be  forfeited  only  by  proceedings  instituted  by  the 
Attorney-General  by  direction  of  the  Governor  in  the  Superior 
Court  of  the  county  in  which  the  bank  was  located,  Code,  §  2350. 
The  method  provided  by  this  section,  which  follows  §  5239,  U.  S.  R. 
S.;  §  9831,  U.  S.  Comp.  Stat.,  and  §  49  of  the  Alabama  law,  is 
simpler  and  more  direct. 

§  131.     SEC.  3.     Liquidation  Where  Charter  Forfeited. 

Where  the  charter  of  any  bank  shall  be  forfeited,  the  Superin- 
tendent of  Banks  shall  take  charge  of  the  business  and  assets  of 
such  bank  and  proceed  to  liquidate  it  in  the  same  manner  as  is 
herein  provided  in  cases  where  the  superintendent  takes  charge  of 
a  bank. 

When  a  charter  was  forfeited  under  the  old  law,  a  receiver  was 
appointed  by  the  Superior  Court  to  administer  the  assets.  Code,  § 
2351.  Administration  by  the  Superintendent  should  be  more  efficient 
and  less  expensive.  Where  the  Superintendent  administers,  he  holds 
the  assets  as  a  receiver.  McDavid  v.  Bank  of  Bay  Minette,  193  Ala. 
341,  69  So.  452. 

§  132.     SEC.  4.     No  Suits  for  Forfeiture  or  Liquidation  Except 
by  Superintendent. 

No  suit  to  forfeit  the  charter  of  any  bank,  or  for  the  liquida- 
tion of  any  bank,  or  for  the  appointment  of  a  receiver  of  any 
bank,  shall  be  instituted  by  any  person  except  by  and  through  the 
Superintendent  of  Banks  in  the  name  of  the  State.  Any  person 
shall  have  the  right  to  submit  to  the  Superintendent  of  Banks  any 
facts  which  under  the  law  would  authorize  the  forfeiture  of  the 
charter  of  a  bank,  or  any  facts  which  would  authorize  the  liquida- 
tion of  a  bank,  or  the  appointment  of  a  receiver  therefor,  and  on 
such  submission  being  made,  it  shall  be  the  duty  of  the  Super- 
intendent of  Banks  to  investigate, 'and  if  on  such  investigation, 
he  ascertains  that  the  facts  are  such  as  will  justify  action  for 
forfeiture  of  the  charter,  or  for  the  liquidation  of  the  bank,  or 
for  the  appointment  of  a  receiver,  it  shall  be  the  duty  of  the  Su- 
perintendent to  take  appropriate  action  in  the  premises. 

Formerly  proceedings  could  only  be  insituted  by  the  Attorney- 
General  by  direction  of  the  Governor.  Code,  §  2350.  This  section 
follows  §  49  of  the  Alabama  law  and  §  5239,  U.  S.  R.  S.;  §  9831, 
U.  S.  Comp.  Stat.,  in  substance. 


BANKING  ACT  OF  1919.  65 

ARTICLE  XVI. 

Mandamus  Against  Superintendent. 

§  133.     SECTION  1.     Superintendent  Subject  to  Mandamus. 

In  the  event  the  Superintendent  of  Banks  should  refuse  to 
issue  any  permit  authorizing  the  incorporation  of  any  bank,  or  the 
amendment,  renewal  or  surrender  of  the  charter  of  any  bank, 
or  authorizing  any  bank  to  begin  business,  or  any  other  permit, 
authority  or  certificate  required  to  be  given  or  furnished  by  him 
before  any  act  or  thing  shall  be  permitted  or  done,  or  should  re- 
fuse to  do  any  act  or  thing  authorized  or  required  by  this  act  to 
be  done,  the  person  or  persons  affected  by  such  failure  or  refusal, 
or  the  bank  so  affected,  may  institute  appropriate  proceedings  in 
the  nature  of  a  mandamus  against  the  Superintendent  in  the 
Superior  Court  of  the  county  in  which  such  bank  is  sought  to  be 
incorporated  or  have  its  charter  amended,  renewed  or  surren- 
dered, to  compel  him  to  issue  such  permit  or  authority,  or  to  do 
any  such  act  or  thing  authorized  or  required  to  be  done  hereunder, 
which  proceeding  shall  be  tried  as  in  other  cases  of  mandamus. 
Service  of  such  proceedings  shall  be  made  on  the  Superintendent 
of  Banks  by  second  original  as  now  prescribed  by  law. 

The  Superintendent  being  invested  with  great  powers  by  this  act, 
this  Article  was  inserted  to  prevent  his  arbitrary  refusal  to  act  in 
proper  cases.  Similar  provision  is  made  by  the  Alabama  law,  §  30. 

§  134.     SEC.  2.     Trial  and  Judgment. 

On  the  trial  of  any  such  cause  the  Superintendent  shall  have 
the  right  to  introduce  evidence  to  sustain  or  tending  to  sustain 
his  action  or  refusal  to  act  in  the  premises,  and  if  from  the 
evidence  in  the  case  the  court  is  of  the  opinion  that  such  permit, 
or  authority,  or  certificate  has  been  wrongfully  or  improperly 
refused  or  withheld  by  the  Superintendent,  and  that  the  facts 
and  circumstances  authorize  and  require  the  granting  of  such 
permit,  authority,  or  certificate,  or  that  the  Superintendent  has 
wrongfully  or  improperly  refused  to  do  any  act  or  thing  author- 
ized or  required  by  this  act  to  be  done,  and  that  the  same  should 
be  done,  the  court  shall  render  an  order,  judgment  or  decree  di- 
recting the  Superintendent  of  Banks  to  issue  such  permit,  author- 
ity or  certificate,  or  to  do  such  act  or  thing,  and  thereupon  the 
5 


66  PARK'S  BANKING  LAW  OF  GEORGIA. 

Superintendent  shall  issue  or  do  the  same,  and  may  state  in  any 
permit,  authority  or  certificate  issued  by  him  under  such  order, 
that  the  same  is  done  by  order  of  the  court. 

§  135.     SEC.  3.     Exceptions. 

A  bill  of  exceptions  may  be  sued  out  by  either  party  who  may 
be  dissatisfied  with  the  judgment,  and  the  cause  may  be  carried 
to  the  Supreme  Court  as  in  other  cases  of  mandamus  proceedings. 

Judgments  in  mandamus  proceedings  are  reviewed  upon  fast 
writs  of  error  in  the  same  way  as  are  the  grant  or  refusal  of  injunc- 
tions. Code,  §§  5447,  6153. 


ARTICLE  XVII. 

Powers  of  Banks. 

§  136.     SECTION  1.     General  Powers  of  Banks  Enumerated. 

A  bank  organized  under  this  act  shall  have  power : 

1.  To  have  continual  succession  for  the  term  of  thirty  (30) 
years,  with  the  rights  of  renewal  herein  provided  for,  with  all 
corporate  powers  and  privileges  herein  granted. 

2.  To  sue  and  be  sued. 

3.  To  have  and  use  a  common  seal,  and  at  pleasure  to  alter  the 
same. 

4.  To  appoint  such  officers,  agents,  and  employees  as  the  busi- 
ness of  the  bank  may  require,  prescribe  their  duties,  and  fix  their 
compensation  as  may  be  provided  by  the  by-laws. 

5.  To  make  such  by-laws  as  may  be  necessary  or  proper  for 
the  management  of  its  property  and  the  regulation  of  its  affairs. 

6.  To  hold,  purchase,  encumber,  dispose  of,  and  convey  such 
real  and  personal  property  as  may  be  necessary  for  its  uses  and 
business,  subject  to  the  restrictions  and  limitations  herein  pre- 
scribed. 

7.  To  discount  bills,  notes  or  other  evidences  of  debt;   to  re- 
ceive and  pay  out  deposits,  with  or  without  interest ;  to  receive  on 
special  deposit,  money,  bullion,  foreign  coin,  stocks,  bonds,  or 
other  securities,  or  other  property ;  to  buy  and  sell  foreign  or  do- 
mestic exchange  or  other  negotiable  paper;   to  issue  and  sell  ac- 
ceptances ;  to  lend  money  upon  personal  security,  or  upon  pledges 


BANKING  ACT  OF  1919.  67 

of  bonds,  stocks,  or  securities ;   to  take  and  receive  security,  by 
mortgage  or  otherwise,  on  property  real  or  personal. 

Loans  and  discounts  are  synonymous  terms.  National  Bank  of 
Gloversville  v.  Johnson,  104  U.  S.  271,  26  L.  Ed.  742. 

"A  discount  by  a  bank  means,  ex  vi  termini,  a  deduction  or  draw- 
back made  upon  its  advances  or  loans  of  money,  upon  negotiable 
paper,  or  other  evidences  of  debt,  payable  at  a  future  day,  which 
are  transferred  to  the  bank."  Fleckner  v.  The  Bank  of  the  United 
States,  21  U.  S.  338,  351,  5  L.  Ed.  631. 

"A  deposit  may  be  for  a  specific  purpose,  as  where  money  or  prop- 
erty is  delivered  to  the  bank  for  some  particular  designated  purpose, 
as  a  note  for  collection,  money  to  pay  a  particular  note  or  draft,  etc. 
While  such  a  deposit  is  sometimes  termed  a  'special  deposit'  and 
partakes  of  the  nature  of  a  special  deposit  to  the  extent  that  title 
remains  in  the  depositor  and  does  not  pass  to  the  bank,  yet  it  seems 
more  accurate  to  look  on  this  as  a  distinct  class  of  deposit.  In 
using  deposits  made  for  the  purpose  of  having  them  applied  to  a 
particular  purpose,  the  bank  acts  as  the  agent  of  the  depositor ;  and 
if  it  should  fail  to  apply  it  at  all,  or  should  misapply  it,  it  can  be 
recovered  as  a  trust  deposit ;  and  the  agency  created  by  the  deposit 
is  revocable  by  the  depositor  at  any  time  before  the  purpose  of  the 
deposit  has  been  accomplished."  Cooper  v.  National  Bank  of  Sa- 
vannah, 21  Ga.  App.  364. 

8.  To  increase  or  decrease  its  capital  stock  in  the  manner  herein 
provided. 

9.  To  increase  or  decrease  the  number  of  its  directors  in  the 
manner  herein  provided. 

This  Section  reenacts  Code,  §  2266,  which  was  codified  from  the 
Act  of  December  20,  1893,  the  general  law  for  the  incorporation  of 
banks,  except  that  to  paragraph  six  is  added  "subject  to  the  restric- 
tions and  limitations  herein  prescribed" ;  in  paragraph  seven  is  in- 
serted "to  issue  and  sell  acceptances,"  and  paragraph  nine  is  added. 

Pursuant  to  the  amendment  to  the  Constitution  authorizing  the 
Secretary  of  State  to  grant  charters  to  banks  (and  certain  other 
corporations),  a  general  law  for  the  incorporation  of  banks  was 
adopted  on  October  21,  1891  (Acts,  1890-91).  Banks  incorporated 
under  this  act  were  given  not  only  general  banking  powers,  but 
also  many  of  the  powers  usual  to  trust  companies.  This  act  was 
superseded  by  the  Act  of  1893,  which  so  far  as  the  powers  of  banks 
incorporated  under  it  are  concerned  remained  unchanged  until  this 
section  was  adopted.  There  are  still  a  considerable  number  of  banks 
organized  and  doing  business  under  special  charter  granted  by  the 
General  Assembly  before  the  amendment  of  the  Constitution.  Ref- 
erence must  be  had  to  these  charters  to  determine  the  powers  of 
such  banks.  By  the  Act  of  1896,  p.  35,  Code,  §  2271,  the  Secretary  of 
State  was  authorized  to  grant  amendments  to  these  special  charters 
so  as  to  incorporate  therein  any  of  the  provisions  of  the  general  law 
for  the  incorporation  of  banks  or  any  amendments  thereof. 

"All  corporations  have  the  right  to  sue  and  be  sued,  to  have  and 
use  a  common  seal,  to  make  by-laws,  binding  on  their  own  members, 
not  inconsistent  with  the  laws  of  this  State,  and  of  the  United 
States,  to  receive  donations  by  gift  or  will,  to  purchase  and  hold 
such  property,  real  or  personal,  as  is  necessary  to  the  purpose  of 
their  organization,  and  to  do  all  such  acts  as  are  necessary  for  the 
legitimate  execution  of  this  purpose."  Code,  §  2216. 


68  PARK'S  BANKING  LAW  OF  GEORGIA. 

"Where  a  banking  corporation  acquires  possession  of  property 
either  by  a  lien  thereon,  or  by  the  purchase  of  the  same  for  the  pay- 
ment of  a  debt  due  to  it,  and  expends  money  on  it,  or  furnishes 
supplies  either  for  its  preservation  or  to  carry  on  the  business  in 
which  such  property  is  employed,  with  a  view  to  rendering  it  pro- 
ductive, in  order  to  satisfy  the  debt  the  bank  holds  against  the 
former  owner  of  the  property,  it  is  not  chargeable  with  exceeding 
its  corporate  powers  by  engaging  in  a  business  beyond  the  scope 
and  purpose  of  its  creation."  Reynolds  v.  Simpson,  74  Ga.  454. 


ARTICLE  XVIII. 

Liability  of  Stockholders. 

§  137.     SECTION  1.     Stockholders'  Liability,  Extent  of. 

A  bank  incorporated  under  this  act  shall  be  responsible  to  its 
creditors  to  the  extent  of  its  capital  and  its  assets ;  and  each 
stockholder  shall  be  individually  liable  for  all  the  debts  of  said 
bank  to  the  extent  of  the  balance  remaining  unpaid  on  his  or  her 
shares  of  stock ;  and  said  stockholders  shall  be  further  and  ad- 
ditionally individually  liable,  equally  and  ratably  (and  not  one 
for  another)  to  depositors  of  such  bank  for  all  moneys  deposited 
therein,  in  an  amount  equal  to  the  face  value  of  their  respective 
shares  of  stock;  it  being  the  true  intent  and  purpose  of  this  sec- 
tion, that  as  to  depositors  for  all  moneys  deposited  with  said 
bank,  there  shall  be  an  individual  liability  upon  each  stockholder 
of  such  bank,  over  and  beyond  the  par  value  of  his  or  her  original 
shares  of  stock  in  amount  to  the  face  value  of  said  shares  of 
stock ;  provided,  that  said  liability  of  the  stockholders  shall  not 
prevent  depositors  from  having  equal  rank  with  all  other  creditors 
upon  the  capital,  property,  and  assets  of  said  bank. 

This  reenacts  Code,  §  2270,  codified  from  the  Act  of  1893,  the  gen- 
eral law  for  the  incorporation  of  banks.  This  was  the  first  general 
law  imposing  such  liability.  Whether  prior  to  this  act  such  liability 
existed  in  any  given  case  and  the  extent  thereof  depended  on  the 
terms  of  the  special  charter  under  which  the  bank  was  organized. 
Wheatley  v.  Glover,  125  Ga.  710.  Where  the  charter  made  the  stock- 
holders liable,  the  liability  could  be  enforced  by  a, receiver  appointed 
under  authority  of  the  Bank  Bureau  Act  of  1907.  Harris  v.  Taylor, 
148  Ga.  663. 

§  138.     SEC.  2.     Exception  for  Trustees  and  Other  Fiduciaries. 

Persons  holding  stock  as  executors,  administrators,  guardians, 
or  trustees  shall  not  be  personally  subject  to  any  liabilities  as 
stockholders;  but  the  estates  and  funds  in  their  hands  shall  be 


BANKING  ACT  OF  1919.  69 

liable  in  like  manner  and  to  the  same  extent  as  the  testator, 
intestate,  ward,  or  person  interested  in  such  trust  fund  would 
be,  if  living  and  competent  to  act  and  hold  the  stock  in  his  own 
name :  Provided,  That  nothing  herein  contained  shall  relieve  any 
executor,  administrator,  guardian  or  trustee  from  individual  lia- 
bility as  a  stockholder  upon  any  unauthorized  subscription  for  or 
investment  in  bank  made  by  such  executor,  administrator, 
guardian  or  trustee. 

This  section  is  taken  from  the  National  Bank  Act,  §  5152,  U.  S.  R. 
S. ;  §  9690,  U.  S.  Comp.  Stat.,  the  proviso  making  the  fiduciary  liable 
for  unauthorized  investments  being  added. 

§  139.     SEC.  3.     Liability  of  Stockholder  After  Transfer  of 
Stock. 

Whenever  a  stockholder  in  any  bank  is  individually  liable  under 
the  charter,  and  shall  transfer  his  stock,  and  have  such  transfer 
entered  upon  the  books  of  the  bank  or  give  to  the  bank  written 
notice  thereof,  he  shall  be  exempt  from  such  liability  by  such 
transfer,  unless  such  bank  shall  fail  within  six  (6)  months  from 
the  date  of  the  entry  of  such  transfer,  or  from  the  delivery  of 
such  notice  to  the  bank. 

This  is  a  reenactment  of  Code,  §  2247,  the  clauses  "and  have  such 
transfer  entered  upon  the  books  of  the  bank  or  give  to  the  bank 
written  notice  thereof,"  and  "or  from  the  delivery  of  such  notice 
to  the  bank"  being  added  for  the  purpose  of  clearing  up  the  doubt 
existing  as  to  when  the  transfer  should  be  regarded  as  complete. 

§  140.     SEC.  4.     Liability  When  Bank  Fails. 

The  stockholder  in  whose  name  the  capital  stock  stands  upon 
the  books  of  such  bank  at  the  date  of  its  failure,  shall  be  primarily 
liable  to  respond  upon  such  individual  liability;  but  upon  proof 
made  that  any  stockholder  at  the  date  of  the  failure  is  insolvent, 
recourse  may  be  had  against  the  person  from  whom  such  insol- 
vent stockholder  received  his  stock,  if  within  a  period  of  six  (6) 
months  prior  to  the  date  of  the  failure  of  such  bank. 

This  reenacts  Code,  §  2248. 

One  recovery  only  can  be  had,  where  successive  owners  of  same 
shares  are  alike  liable,  one  of  them  because  he  owns  the  shares  now, 
another  because  of  past  ownership  and  failure  upon  transferring  to 
give  notice  prescribed  by  §  1496  of  Code  of  1882,  though  creditors 
entitled  to  recover  from  each  as  though  liability  wholly  his  own. 
Chatham  Bank  v.  Brobston,  99  Ga.  801  (6),  (27  S.  E.  790). 

Rule  for  locating  burden  among  the  successive  owners  themselves 
is  that  the  loss  should  fall  ultimately  upon  the  successive  owners  in 
the  inverse  order  of  their  ownership  in  point  of  time;  special  facts 
may  dictate  different  order.  Chatham  Bank  v.  Brobston,  99  Ga.  801 
(7),  (27  S.  E.  790). 


70  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  141.     SEC.  5.     Failure  of  Bank  Defined. 

A  bank  shall  be  deemed  to  have  failed  within  the  purview  of 
this  act  whenever  such  bank  shall  have  become  insolvent  and  its 
assets  and  business  shall  have  been  surrendered  to  or  taken  pos- 
session of  by  the  Superintendent  of  Banks. 

This  section  was  inserted  for  the  purpose  of  making  clear  the 
right  of  the  Superintendent  to  enforce  the  liability  of  the  stockhold- 
ers whenever  an  insolvent  bank  should  be  taken  charge  of  by  him. 
See  §  70  of  the  Act. 

§  142.     SEC.  6.     Premature  Organization. 

Persons  who  organize  a  bank  and  transact  business  in  its  name 
before  the  minimum  capital  stock  under  this  act  has  been  sub- 
scribed for  and  before  a  permit  has  been  issued  by  the  Superin- 
tendent of  Banks  authorizing  the  transaction  of  business  in.  the 
name  of  such  bank,  are  jointly  and  severally  liable  to  creditors  to 
make  good  such  minimum  capital  stock  with  interest ;  and  liability 
under  this  section  shall  be  enforced  as  hereinafter  provided. 

This  section  reenacts  with  special  reference  to  banks,  Code,  §  2220, 
which  was  applicable  to  all  corporations  organized  under  the  laws  of 
Georgia.  Creditors  have  a  right  to  presume  that  the  minimum 
capital  allowed  by  the  charter  has  been  subscribed,  the  fact  alone  of 
commencement  of  business  created  that  presumption,  to  that  extent 
stockholders  are  liable.  Hill  v.  Silvey,  81  Ga.  500. 

§  143.     SEC.  7.     Liability  of  Stockholders  or  Incorporators 
as  Assets. 

The  individual  liability  of  stockholders  and  that  of  persons 
doing  business  in  the  name  of  a  bank  before  the  minimum  capital 
stock  is  subscribed  and  before  a  permit  has  been  issued  by  the 
Superintendent  of  Banks  authorizing  the  bank  to  begin  business, 
shall  be  assets  of  such  bank  to  be  enforced  only  by  and  through 
the  Superintendent  of  Banks. 

Under  Code,  §  2249,  the  stockholders'  liability  was  an  asset  "to 
be  enforced  by  the  assignee,  receiver  or  other  officer  having  the  legal 
right  to  collect,  marshal  and  distribute  the  assets." 

§  144.     SEC.  8.     Collateral  Liability  Not  Affected  by  Dissolu- 
tion. 

The  surrender  or  forfeiture  of  a  charter  of  any  bank,  or  its 
dissolution  for  any  cause,  shall  not  in  any  manner  affect  any  col- 
lateral or  ultimate  or  other  liability  legally  incurred  by  any  of  its 
stockholders,  directors  or  officers. 

This  is  a  reenactment  of  Code,  §  2246. 


BANKING  ACT  OF  1919.  71 

ARTICLE  XIX. 

Regulation  of  the  Business  of  Banking. 

§  145.     SECTION  1.     Board  of  Directors,  Number  and  Election. 

The  affairs  of  each  bank  shall  be  managed  by  a  board  of  not 
less  than  three  (3)  nor  more  than  twenty-five  (25)  directors  who 
shall  be  elected  by  the  stockholders  at  a  meeting  to  be  held  at  any 
time  before  the  bank  is  authorized  by  the  Superintendent  of 
Banks  to  commence  the  business  of  banking,  and  afterwards  at 
meetings  to  be  held  annually  at  such  time  as  may  be  fixed  by  the 
by-laws  of  the  bank.  The  directors  shall  hold  office  for  one  (1) 
year  and  until  their  successors  are  elected  and  have  qualified.  A 
bank,  at  any  annual  meeting  of  the  stockholders  for  the  election 
of  directors,  provided  notice  thereof  be  given  in  the  notice  of  the 
annual  meeting,  may,  by  a  majority  vote  of  all  the  stockholders 
of  such  bank,  fix  or  change  by  resolution  the  number  of  directors, 
provided  the  number  of  directors  shall  not  be  less  than  three  (3) 
nor  more  than  twenty-five  (25),  which  number  when  so  fixed 
shall  be  the  lawful  number  of  directors  of  such  bank  until  again 
changed  in  like  manner.  Certified  copies  of  all  resolutions  fixing 
or  changing  the  number  of  directors  under  this  section  shall  be 
immediately  filed  with  the  Superintendent  of  Banks. 

This  reenacts  in  substance  part  of  Code,  §  2302,  adding  the  pro- 
vision for  changing  the  number  of  directors.  Under  the  old  law  the 
number  of  directors  could  be  changed  only  by  an  amendment  of  the 
charter,  Code,  §  2267. 

The  control  of  the  bank  is  vested  in  the  board  of  directors.  Mer- 
chants' Bank  of  Macon  -u.  Rawls  &  Taylor,  7  Ga.  196. 

The  board  of  directors  exercise  the  corporate  powers  of  the  bank. 
Wood  Hydraulic  Hose  Mining  Co.  v.  King,  45  Ga.  34. 

A  director  may  resign  at  any  time.  Briggs  -v.  Spalding,  141  U.  S. 
132,  35  L.  Ed.  662. 

Bank  directors  are  often  styled  trustees,  but  not  in  any  technical 
sense.  The  relation  between  the  corporation  and  them  is  rather  that 
of  principal  and  agent.  The  degree  of  care  required  of  them  is  the 
same  as  that  which  men  of  ordinary  prudence  exercise  in  regard  to 
their  own  affairs.  Briggs  v.  Spalding,  141  U.  S.  132,  35  L.  Ed.  662. 

Directors  primarily  represent  the  corporation  and  its  stockholders, 
but  when  the  corporation  becomes  insolvent  they  are  bound  to  man- 
age the  remaining  assets  for  the  benefit  of  its  creditors,  and  can 
not  in  any  manner  use  their  powers  for  the  purpose  of  obtaining  a 
preference  or  advantage  to  themselves.  Code,  §  2222. 


72  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  146.     SEC.  2.     Qualifications  of  Directors. 

Every  director  of  a  bank  having  a  capital  stock  of  fifteen  thou- 
sand ($15,000.00)  dollars  or  more  and  not  exceeding  fifty  thou- 
sand ($50,000.00)  dollars,  must  own  in  his  own  right  at  least 
two  >(2)  shares  of  such  stock;  upon  which  all  installments  which 
are  due  shall  have  been  fully  paid,  and  every  director  of  a  bank 
having  a  capital  stock  of  more  than  fifty  thousand  ($50,000.00) 
dollars  must  so  own  at  least  five  (5)  shares  of  the  capital  stock 
of  the  bank  of  which  he  is  a  director.  Any  director  who  ceases 
to  be  the  owner  of  the  number  of  shares  herein  required  or  who 
fails  to  pay  any  installment  thereon  when  the  same  becomes  due, 
or  who  becomes  in  any  other  manner  disqualified,  shall  thereby 
vacate  his  place  as  a  member  of  the  board. 

Under  Code,  §  2267,  directors  were  required  to  be  "owners  and 
holders  of  one  or  more  shares  of  the  capital  stock  in  good  faith." 
The  last  sentence  of  the  section  is  taken  substantially  from  §  5146, 
U.  S.  R.  S. ;  §  9684  U.  S.  Comp.  Stat. 

§  147.     SEC.  3.     Oath  of  Directors. 

Each  director,  when  elected,  shall  take  an  oath  that  he  will,  so 
far  as  the  duty  delvolves  upon  him,  diligently  and  honestly  ad- 
minister the  affairs  of  the  bank,  and  that  he  will  not  knowingly 
violate,  or  willingly  permit  to  be  violated,  any  of  the  provisions 
of  law  applicable  to  such  bank  or  any  of  the  by-laws  thereof ; 
and  that  he  is  the  owner  in  good  faith  and  in  his  own  right,  of  the 
number  of  shares  of  stock  required  by  this  act,  standing  in  his 
own  name  on  the  books  of  the  bank.  Such  oath  shall  be  sub- 
scribed by  the  director  making  it,  and  certified  by  the  officer 
before  whom  it  is  taken,  and  shall  be  immediately  transmitted  to 
the  Superintendent  of  Banks,  and  filed  and  preserved  in  his  office. 

This  section  is  taken  substantially  from  §  5147,  U.  S.  R.  S. ;  § 
9685,  U.  S.  Comp.  Stat.  That  section  requires  the  director  also  to 
swear  that  the  stock  standing  in  his  name  is  not  hypothecated  or 
pledged  in  any  way  as  security  for  any  loan  or  debt.  New  York 
requires  an  oath  of  similar  character  from  directors.  §  124,  N.  Y. 
law. 

§  148.     SEC.  4.     Meetings  of  the  Board  of  Directors. 

The  board  of  directors  shall  hold  regular  meetings  at  such 
times  as  may  be  fixed  by  the  by-laws,  at  least  once  each  month, 
and  shall  at  all  times  be  subject  to  call  by  the  president  or  by  any 
two  members  of  the  board.  A  majority  of  the  board  of  directors 
shall  constitute  a  quorum  for  the  transaction  of  business.  Correct 


BANKING  ACT  OF  1919.  73 

written  minutes  of  all  meetings  shall  be  kept  in  well-bound  per- 
manent books  kept  for  that  purpose,  and  the  minutes  of  each 
meeting  shall  be  signed  by  the  chairman  and  secretary  thereof, 
and  shall  record  the  names  of  the  directors  present  at  such  meet- 
ing. At  each  meeting  the  minutes  of  the  preceding  meeting  shall 
be  read,  corrected  and  approved.  The  minute  book  shall  be 
submitted  to  the  examiner  at  each  of  their  semiannual  examina- 
tions, and  shall  be  examined,  and  the  fact  of  such  examination 
shall  be  noted  in  the  examiner's  report,  and  the  minute  book. 

The  Bank  Bureau  Act,  Code,  §  2302,  required  the  directors  to  hold 
at  least  one  meeting  each  three  months  and  to  keep  correct  minutes 
signed  by  two  officers.  New  York  also  requires  directors'  meetings 
to  be  held  at  least  once  each  month.  §  129,  N.  Y.  law. 

Where  a  corporation  is  empowered  to  act  through  its  board  of 
directors  or  a  committee,  individual  or  separate  action  of  the  mem- 
bers of  such  board  is  not  sufficient,  the  agent  of  the  corporation  is 
the  board  itself  acting  in  its  organized  capacity  and  not  its  members 
acting  independently  of  its  meetings.  Monroe  M.  Co.  v.  Arnold, 
108  Ga.  449. 

§  149.     SEC.  5.     Semiannual  Examinations  by  Directors. 

It  shall  be  the  duty  of  the  board  of  directors  of  every  bank,  at 
.least  once  in  each  six  (6)  months,  to  count  the  cash  and  examine 
fully  into  the  books,  papers,  and  affairs  of  the  bank  of  which 
they  are  directors,  and  particularly  into  the  loans  and  discounts 
thereof,  with  the  special  view  of  ascertaining  the  value  and  se- 
curity thereof,  and  the  collateral  security,  if  any,  given  in  connec- 
tion therewith,  and  into  such  other  matters  as  the  Superintendent 
of  Banks  may  require.  Such  directors  may  conduct  such  count 
and  examination  by  a  committee  of  at  least  three  (3)  of  its  mem- 
bers; and  shall  have  the  power  to  employ  certified  public  ac- 
countants or  other  expert  assistance  in  making  such  examinations, 
if  they  deem  the  same  necessary.  Within  ten  ( 10)  days  after  the 
completion  of  each  of  such  examinations,  a  report  in  writing 
thereof,  sworn  to  by  the  directors  making  the  same,  shall  be  made 
to  the  board  of  directors,  which  report  shall  be  spread  upon  the 
minutes  of  said  board ;  and  the  original  thereof  shall  be  placed 
on  file  in  said  bank,  and  a  duplicate  thereof  filed  with  the  Super- 
intendent of  Banks. 

This  and  §  150,  151  and  152  are  an  amplification  of  Code,  §  2302, 
taken  from  the  Bank  Bureau  Act,  that  section  also  requiring  semi- 
annual examinations  by  the  directors,  the  charging  off  of  worthless 
paper,  entering  the  report  on  the  minutes,  etc.  These  sections  follow 
to  some  extent  §  130  of  the  New  York  law. 


74  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  150.     SEC.  6.     Report  of  Examination,  What  Must  Contain. 

Such  report  shall  contain  statements  in  detail,  (1)  of  the  assets 
and  liabilities  of  the  bank  examined,  as  shown  by  the  books,  to- 
gether with  any  deductions  from  the  assets  or  additions  to  the 
liabilities  which  such  directors  or  committee  after  such  examina- 
tion may  determine  to  make;  (2)  of  loans,  if  any,  which  in  their 
opinion  are  worthless  or  doubtful,  together  with  their  reasons  for 
so  regarding  them;  (3)  of  loans  made  on  collateral  security 
which  in  their  opinion  are  insufficiently  secured,  giving  in  each 
case  the  amount  of  the  loan,  and  the  name  and  market  value  of 
the  collateral,  if  such  collateral  has  any  market  value,  and  if  not 
its  actual  value  as  nearly  as  can  be  determined ;  (4)  of  all  over- 
drafts and  separately  of  overdrafts  which  are  considered  worth- 
less or  doubtful,  or  which  have  been  made  without  authority,  with 
the  name  of  the  officer  or  employee  making  or  approving  the 
same*;  (5)  of  all  past  due  paper;  (6)  of  all  demand  loans 
upon  which  no  interest  has  been  paid  within  the  last  pre- 
ceding six  (6)  months;  (7)  of  all  loans  in  excess  of  the 
amount  authorized  herein  to  be  made;  (8)  of  all  loans  made 
to  the  officers,  agents,  employees,  and  directors  of  the  bank,  with 
the  securities  held  therefor ;  and  of  all  loans  to  firms  or  corpora- 
tions in  which  the  officers,  agents,  employees,  or  directors  of  the 
bank  are  interested ;  (9)  and  of  all  such  other  matters  and  things 
as  may  affect  the  solvency  or  soundness  of  the  bank.  No  report 
shall  be  held  or  considered  as  complying  with  the  provisions  of 
this  section  unless  it  shows  affirmatively  the  existence  or  non- 
existence  of  all  the  items  concerning  which  statements  are  re- 
quired. Said  directors  or  such  committee  shall  also  in  said  report 
make  recommendations  to  the  board  as  to  the  manner  of  con- 
ducting business  by  the  bank,  calling  attention  to  any  matters 
which  in  their  opinion  are  unauthorized  or  improper,  and  sug- 
gesting any  changes  or  improvements  in  the  method  of  conducting 
the  business  or  handling  the  affairs  of  the  bank  which,  in  their 
opinion,  will  be  an  improvement  upon  the  system  in  operation  or 
tend  in  any  way  to  the  safety  or  soundness  of  the  bank. 

§  151.     SEC.  7.     Action  on  Report. 

The  board  of  directors  at  the  meeting  which  such  report  of  the 
semiannual  examination  is  read  shall,  by  resolution  entered  on 
the  minutes,  require  that  all  debts  due  to  the  bank,  which  are  past 
due  for  a  period  of  one  year  and  which  are  not  amply  secured, 


BANKING  ACT  OF  1919.  75 

shall  be  collected,  placed  in  suit  or  charged  to  profit  and  loss ;  that 
all  past  due  interest  shall  be  collected  upon  any  note  upon  which 
no  such  interest  has  been  paid  within  the  last  preceding  twelve 
(12)  months,  or  that  said  note  shall  be  collected,  put  in  suit,  or 
charged  to  profit  and  loss ;  and  that  all  assets  or  claims  in  favor 
of  the  bank,  which  in  the  opinion  of  the  directors  are  worthless 
or  uncollectible,  shall  also  be  charged  to  profit  and  loss  and  not 
included  in  the  list  of  assets  of  the  bank.  Said  board  shall  at 
such  meeting  also  require  that  all  loans  in  excess  of  the  amount 
herein  authorized  to  be  made  shall  be  reduced  at  once  so  as  to 
bring  them  within  the  proper  amount. 

A  certified  copy  of  the  resolutions  of  the  board  acting  on  the 
matters  brought  to  their  attention  in  the  report  of  the  semiannual 
examination  shall  be  filed  with  the  Superintendent  of  Banks 
within  ten  ( 10)  days  after  said  meeting  shall  have  been  held. 

§  152.     SEC.  8.     Failure  to  Comply  with  Preceding  Section, 

Result  of. 

In  the  event  the  board  of  directors  of  any  bank  should  fail  to 
make  an  examination  every  six  (6)  months,  the  Superintendent 
of  Banks  shall,  by  an  order  under  his  hand  and  official  seal,  ad- 
dressed to  the  president  of  the  bank,  require  that  a  meeting  of  the 
board  of  directors  shall  be  called  immediately  and  that  the  exami- 
nation shall  be  made  within  ten   (10)   days  after  such  special 
meeting  of  the  board,  and  if  such  meeting  be  not  so  held  and 
such  examination  made  within  said  time  and  report  thereof  made 
and  submitted  to  the  Superintendent  of  Banks,  the  said  Super- 
intendent shall  be  authorized  to  take  charge  of  the  bank  as  in 
other  cases  herein  provided  for  wilful  refusal  to  obey  the  lawful 
orders  of  the  said  Superintendent.     If  it  shall  appear  from  the 
report  of  such  examination  that  the  bank  is  carrying  as  an  asset 
any  worthless  paper  or  other  property,  or  that  any  asset  should 
be  charged  to  profit  and  loss  and  not  included  in  the  assets  of  said 
bank,  and  the  directors  at  the  meeting  aforesaid  should  fail  to 
order  such  assets  charged  to  profit  and  loss,  or  if  the  Superin- 
tendent of  Banks  shall  ascertain  from  any  examination  or  other- 
wise that  any  bank  continues  to  carry  as  assets  any  worthless 
paper  or  other  property  which  should  be  charged  to  profit  and 
loss,  the  Superintendent  shall  order  the  bank  to  collect  or  charge 
to  profit  and  loss  all  such  worthless  assets  at  once,  and  upon 
failure  to  comply  with  such  order,  may  take  possession  of  such 
bank  as  in  other  cases  provided. 


76  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  153.     SEC.  9.     Officers. 

The  board  of  directors  at  their  first  meeting  after  the  annual 
election  shall  elect  one  of  their  number  president.  They  shall 
also  elect  one  or  more  vice-presidents,  a  cashier,  and  such  other 
officers  and  agents  as  may  be  provided  by  the  by-laws  as  or 
may  be  required  for  the  prompt  and  orderly  discharge  of  the 
business  of  the  bank.  Immediately  upon  their  election,  a  list,  giv- 
ing the  names  and  addresses  of  the  officers  elected,  certified  under 
the  seal  of  the  bank,  shall  be  transmitted  to  the  Superintendent 
of  Banks  and  be  kept  on  file  by  him. 

Code,  §  2302,  required  the  president  to  be  a  member  of  the  board 
of  directors ;  §  5150,  U.  S.  R.  S. ;  §  9688,  U.  S.  Comp.  Stat.,  makes 
the  same  requirement. 

"Every  corporation  acts  through  its  officers,  and  is  responsible 
for  the  acts  of  such  officers  in  the  sphere  of  their  appropriate  duties; 
and  no  corporation  shall  be  relieved  of  its  liability  to  third  persons 
for  the  acts  of  its  officers  by  reason  of  any  by-law  or  other  limita- 
tion upon  the  power  of  the  officer,  not  known  to  such  third  person." 
Code,  §  2225. 

"Usually  the  question  of  discounting  paper  comes  before  the  board 
of  directors  or  a  committee,  and  the  cashier  is  but  the  executive 
officer  to  carry  out  their  decision ;  his  duties  are  ordinarily  strictly 
executive.  But  beyond  his  inherent  powers,  the  cashier  may  be 
authorized  to  act  for  the  bank  by  the  organic  law,  by  action  of  the 
stockholders,  by  a  vote  of  the  board,  by  usage  and  tacit  approval." 
Morris  v.  Ga.  Loan,  etc.,  Co.,  109  Ga.  21. 

"A  bank,  by  bringing  an  action  upon  a  contract  made  in  its 
behalf  by  one  of  its  officers,  ratifies  his  action  in  making  the  con- 
tract, and  is  in  law  chargeable  with  knowledge  of  whatever  he  knew 
at  the  time  of  so  doing."  Singleton  v.  Bank  of  Monticello,  113  Ga. 
527. 

"Where  an  agent  conspires  with  the  other  party,  his  principal  is 
not  bound  thereby,  nor  charged  with  knowledge  of  facts  thus  ac- 
quired by  his  agent."  Code,  §  3600. 

"Notice  to  the  agent  of  any  matter  connected  with  his  agency  is 
notice  to  the  principal."  Code,  §  3599. 

Notice  to  cashier  is  notice  to  bank.  Lessee  Veasey  v.  Graham, 
17  Ga.  99.  So  is  notice  to  president.  Merchants'  Bank  v.  Guilmar- 
tin,  93  Ga.  509.  But  knowledge  of  president  or  cashier  is  not  knowl- 
edge of  bank  where  he  is  interested  adversely  to  the  bank.  Savan- 
nah Bank  &  Trust  Co.  v.  Hartridge,  73  Ga.  223 ;  People's  Bank  v. 
Exchange  Bank,  116  Ga.  820. 

§  154.     SEC.  10.     Bonds  of  Officers. 

The  board  of  directors  shall  require  the  cashier  and  any  and 
all  other  officers,  [and  employees]*  having  the  care,  control,  or 
handling  of  any  of  the  funds  of  the  bank,  to  give  bond  with  a 
regular  incorporated  surety  company,  qualified  to  do  business  in 
the  State  of  Georgia,  as  surety,  in  such  amounts  as  the  board  shall 
fix,  the  premium  on  such  bond  to  be  paid  by  the  bank.  Such  bonds 


*Inserted  by  Act  of  August  14,  1920. 


BANKING  ACT  OF  1919.  77 

shall  be  held  by  such  custodian  as  the  board  of  directors  may 
designate. 

That  part  of  this  section  which  requires  that  the  surety  shall  be 
a  surety  company  and  the  premium  shall  be  paid  by  the  bank  is  new. 
The  rest  of  the  section  is  taken  from  Code,  §  2304. 

§  155.  SEC.  11.  Borrowing  for  Personal  Use  by  Officers  and 
Employees  Prohibited  Except  by  Permission  of  the 
Directors. 

No  officer,  [director]*  agent,  or  employee  of  any  bank  shall  use 
or  borrow  directly  or  indirectly  for  himself,  or  for  any  firm  or 
partnership  of  which  he  is  a  member,  any  money  or  other  property 
belonging  to  any  bank  of  which  he  is  such  officer,  director,  agent 
or  employee  without  the  express  authority  and  permission  previ- 
ously obtained  of  a  majority  of  the  directors  or  of  the  members 
of  a  committee  of  the  board  of  directors  authorized  to  act,  which 
permission  shall  be  evidenced  by  the  written  signatures  of  such 
directors,  the  borrower  not  voting  or  participating  in  any  way  in 
passing  upon  any  loan  or  discount  in  which  he  may  be  interested. 

This  section  reenacts  Code,  §  2236  (Act  1887,  p.  94),  adding  di- 
rectors and  employees  to  officers  and  agents  and  requiring  that  the 
permission  of  the  directors  or  committee  shall  be  "previously  ob- 
tained" and  evidenced  by  their  "written  signatures." 

Officer  of  bank,  though  having  general  authority  to  make  loans, 
can  not  bind  the  bank  by  lending  its  money  to  himself  or  to  another 
officer  for  his  benefit.  McGregor  v.  Witham,  126  Ga.  702. 

§  156.     SEC.  12.     Loans  to  Officers. 

No  bank  shall  lend  any  officer,  director,  agent,  or  employee  any 
amount  whatever  except  upon  good  collateral  or  other  ample 
security ;  and  no  such  loan  shall  be  made  until  after  it  has  been 
approved  by  a  majority  of  the  directors,  or  by  the  members  of  a 
committee  of  the  board  of  directors  authorized  to  act,  as  in  the 
preceding  section  provided. 

The  amending  Act  of  August  14,  1920,  as  passed  by  the  Senate 
struck  out  the  word  "director"  from  this  section.  The  House,  how- 
ever, omitted  the  provision,  and  the  Senate  concurred,  leaving  the 
section  unchanged. 

Code,  §  2275,  from  which  this  section  is  taken,  only  required  the 
approval  of  the  directors  where  the  loan  exceeded  ten  per  cent,  of 
the  capital  of  the  bank.  That  section  only  applied  to  officers.  This 
adds  directors,  agents  and  employees.  This  section  authorizes  a  com- 
mittee to  make  the  loan,  as  well  as  the  majority  of  the  directors. 

The  section  is  quite  similar  to  §  20  of  the  Alabama  act. 


*By  a  clerical  error  the  word  "director"  was  omitted  in  the  enrolled  copy 
of  the  Act.    It  was  inserted  by  the  Act  of  August  14,  1920. 


78  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  157.     SEC.  13.     Loans  by  Bank,  Limit  of. 

No  bank  shall  be  allowed  to  lend  to  any  one  person,  firm,  or 
corporation  more  than  thirty  (30)  per  cent,  of  its  capital,  unim- 
paired surplus  and  undivided  profits.  And  no  loan  shall  be  made 
in  excess  of  ten  (10)  per  cent,  of  the  capital  except  upon  good 
collateral  or  other  ample  security  and  with  the  approval  of  a 
majority  of  the  directors,  or  of  a  committee  of  the  board  of  di- 
rectors authorized  to  act,  which  approval  shall  be  evidenced  by 
the  written  signatures  of  said  directors  or  the  members  of  said 
committee.  In  estimating  loans  to  any  person,  all  amounts  loaned 
to  firms  and  partnerships  of  which  he  is  a  member  shall  be 
included :  Provided,  however,  That  a  bank  may  buy  from  or 
discount  for  any  person,  firm,  or  corporation,  bills  of  exchange 
drawn  in  good  faith  against  actually  existing  values,  or  commer- 
cial or  business  paper  actually  owned  by  the  person  negotiating 
the  same,  in  addition  to  loans  directly  made  to  the  person,  firm 
or  corporation  selling  the  same,  such  purchase  or  discount,  if  in 
excess  of  ten  (10)  per  cent,  of  the  capital,  to  be  approved  in 
writing  by  a  majority  of  the  directors  or  by  a  committee  of  such 
board  authorized  to  act ;  And  provided,  That  the  limit  of  loans 
herein  fixed  shall  not  apply  to  bona  fide  loans  made  upon  the  se- 
curity of  agricultural,  manufactured,  industrial  products  or  live 
stock,  having  a  market  value  and  for  which  there  is  ready  sale 
in  the  open  market,  title  to  which  by  appropriate  transfer  shall 
be  taken  in  the  name  of  the  bank,  which  shall  be  secured  by  in- 
surance against  loss  by  fire  with  policies  made  payable  to  the 
bank,  where  no  more  than  eighty  (80)  per  cent,  of  the  market 
value  of  such  products  shall  be  loaned  or  advanced  thereon.  In 
all  such  cases  a  margin  of  twenty  (20)  per  cent,  between  the 
amount  of  the  loan  and  the  market  value  of  the  products  shall  at 
all  times  be  maintained  (except  where  products  are  intended  for 
immediate  shipment)  ;  and  the  bank  shall  have  the  right  to  call 
for  additional  collateral  when  the  difference  between  the  market 
value  and  the  amount  loaned  shall  be  less  than  twenty  (20)  per 
cent.,  and  in  the  event  of  the  failure  to  comply  with  such  de- 
mand, to  immediately  sell  all  or  any  part  of  such  products  in  the 
open  market  and  pay  the  amount  of  the  loan  and  the  expenses 
of  sale,  and  the  balance  to  the  borrower ;  and  provided  that 
the  limit  herein  fixed  shall  not  apply  to  loans  fully  secured  by 
bonds  or  certificates  of  indebtedness  of  the  United  States  or  of 
this  State,  or  of  the  several  counties,  districts  or  municipalities 


BANKING  ACT  OF  1919.  79 

thereof  which  have  been  duly  and  regularly  validated  as  provided 
by  law.  Liabilities  arising  to  the  makers  and  indorsers  of  checks, 
drafts,  bills  of  exchange,  received  by  the  bank  on  deposit,  cashed 
or  purchased  by  it,  shall  not  in  any  way  be  considered  as  bor- 
rowed money  or  loans. 

It  shall  be  the  duty  of  the  Superintendent  of  Banks  to  order 
any  loan  in  excess  of  the  amount  herein  fixed  reduced  to  the 
legal  limit  or  the  excess  charged  to  profit  and  loss,  provided  in 
his  opinion  such  excess  is  not  well  secured,  and  if  such  reduction 
shall  not  be  made  within  thirty  (30)  days  after  such  notification, 
to  proceed  as  in  other  cases  provided  for  violation  of  the  orders 
of  the  Superintendent. 

The  Senate  bill  passed  at  the  Session  of  1920  amended  this  sec- 
tion so  as  to  authorize  a  bank  to  lend  ten  per  cent,  of  its  capital  and 
surplus  without  requiring  security,  putting  state  banks  on  an  equality 
with  National  Banks  in  this  regard.  But  the  House  struck  the 
amending  section,  leaving  the  Act  unchanged. 

There  was  no  limit  on  the  amount  a  bank  could  lend  under  the  old 
law,  but  the  loan  if  in  excess  of  ten  per  cent,  of  the  capital  and  sur- 
plus was  required  to  be  "amply  secured  by  good  security."  This 
was  the  only  restriction.  No  approval  of  the  directors  was  re- 
quired, and  loans  to  firms  and  to  the  several  members  thereof  could 
be  treated  as  separate  lines.  The  exceptions  set  out  in  the  proviso 
follow  in  substance  those  in  §  5200,  U.  S.  R.  S.,  as  amended  by  the 
Acts  of  June  22,  1906,  September  24,  1918,  and  October  — ,  1919,  § 
9761,  U.  S.  Comp.  Stat.  Somewhat  similar  provisions  are  contained 
in  §  108  of  the  New  York  law  and  §  21  of  the  Alabama  Act. 

Discussing  §  5200,  U.  S.  R.  S.,  after  which  this  section  is  modeled, 
the  author  of  Pratt's  Digest  says : 

"The  general  purpose  of  this  section  is  obvious.  It  is  to  prohibit 
any  bank  from  hazarding  a  large  amount  of  its  funds  in  loans  to  any 
one  person,  and  to  require  such  a  distribution  of  the  risks  among 
a  large  number  of  persons  that  the  failure  of  any  one  or  two  cus- 
tomers will  not  so  seriously  involve  the  bank  as  to  endanger  its 
solvency.  But  the  transactions  of  the  banks  woud  be  unduly  ham- 
pered if  this  rule  applied  in  the  case  of  all  discounts,  and  so  an 
exception  is  made  in  favor  of  'bills  of  exchange  drawn  against 
actually  existing  values,'  and  'commercial  or  business  paper  actually 
owned  by  the  person  negotiating  the  same.'  In  Second  National 
Bank  of  Oswego  v.  Burt  (93  N.  Y.  233),  it  was  said  by  the  New 
York  Court  of  Appeals:  'The  object  of  this  provision  of  the  cur- 
rency act  was  to  guard  national  banks  from  the  hazard  of  loaning 
money  in  improvident  amounts  upon  speculative  and  accommoda- 
tion paper,  but  it  contemplated  and  permitted,  to  an  unlimited 
amount,  the  discount  of  paper  used  and  required  in  facilitating  the 
transfer  of  property  and  money  in  the  transaction  of  the  legitimate 
business  of  the  country.' 

"Numerous  questions  arise  under  this  section  which  cause  bank 
officers  much  perplexity.  The  question  that  should  always  be  an- 
swered is,  who  is  the  borrower?  i.  e.,  who  procured  the  money  from 
the  bank?  The  liabilities  of  a  person  to  a  bank  as  endorser,  guar- 
antor or  surety  should  not  be  considered  in  computing  the  ten  per 
cent,  limit  unless  such  person  actually  negotiated  the  loan  with  the 
bank  and  received  the  proceeds  derived  therefrom.  *  *  *  But  it 
is  to  be  remembered  that  the  question,  who  is  the  borrower?  is  not 


80  PARK'S  BANKING  LAW  OF  GEORGIA. 

always  to  be  determined  from  the  positions  of  the  parties  as  they 
appear  on  the  paper.  The  borrower  may  be  the  maker,  or  he  may 
be  the  endorser.  It  is  the  person  who  negotiates  the  paper  with  the 
bank,  who  procures  the  money  upon  it,  that  is  the  borrower,  irre- 
spective of  whether  he  appears  thereon  as  endorser  or  guarantor 
or  maker."  Pratt's  Digest,  1917,  p.  116. 

"There  is  no  restriction  of  law  prohibiting  the  Comptroller  of 
Currency  from  permitting  a  national  bank  having  a  lawfully  estab- 
lished branch  to  make  loans  at  either  place,  based  on  the  total 
amount  of  capitalization  and  surplus  of  the  corporation.  The  only 
restriction  of  law  in  this  respect  is  that  the  aggregate  loans  made  by 
the  mother  bank  and  all  its  branches  shall  not  at  any  one  time 
exceed  the  limitations  of  this  section."  (1909)  27  Op.  Atty.  Gen. 
601. 

§  158.     SEC.  14.     Liability  of  Directors  for  Allowing  Loans 
Exceeding  Limit. 

The  directors  of  any  bank  who  shall  approve  or  permit  any 
loan  to  be  made  in  excess  of  the  limit  herein  fixed  shall  be  per- 
sonally and  individually  liable  and  responsible  to  the  bank  for 
such  loan  in  the  event  the  same  should  not  be  paid  by  the  bor- 
rower :  Provided,  however,  That  any  director  who  shall  not  have 
voted  in  favor  of  such  loan  may  have  his  dissent  or  disapproval 
thereof  entered  upon  the  minutes  at  the  meeting  at  which  said 
loan  is  authorized,  or  at  the  next  meeting  held  after  he  has  dis- 
covered that  such  loan  has  been  made,  in  which  event  he  shall 
be  relieved  of  liability  therefor. 

The  National  Bank  Act,  §  5239,  U.  S.  R.  S. ;  §  9831,  U.  S.  Comp. 
Stat.,  provided  that  wherever  a  national  banking  association  know- 
ingly and  wilfully  violates  any  provision  of  the  act,  "every  director 
who  participated  in  or  assented  to  the  same  shall  be  held  liable  in 
his  personal  and  individual  capacity  for  all  damages  which  the  asso- 
ciation, its  shareholders,  or  any  other  person,  shall  have  sustained  in 
consequence  of  such  violation."  The  above  section  is  a  sort  of 
specific  application  of  the  principle  of  this  provision. 

Directors  can  not  be  made  to  respond  to  damages  or  to  pay  ex- 
cessive loans,  unless  some  injury  was  done  to  the  bank  or  loss  sus- 
tained by  reason  thereof.  Emerson  v.  Gaither,  103  Md.  564,  8  L. 
R.  A.  (N.  S.)  738. 

§  159.     SEC.  15.     Loans  on  Real  Estate,  Limit  of. 

No  bank  doing  a  commercial  business  and  receiving  deposits 
subject  to  check,  shall  lend  upon  real  estate  held  as  an  invest- 
ment, or  for  the  purchase  of  real  estate,  or  the  improvement 
thereof,  more  than  fifty  (50)  per  cent,  of  the  fair  market  value 
of  such  real  estate ;  and  the  aggregate  amount  of  such  loans  shall 
at  no  time  exceed  the  amount  of  its  savings  and  time  deposits ; 
provided  that  this  section  shall  not  apply  to  temporary  loans  or 
regular  commercial  transactions  secured  in  whole  or  in  part  by 


BANKING  ACT  OF  1919.  81 

real  estate,  nor  to  any  loan  which  shall  have  been  made  prior  to 
the  approval  of  this  act. 

This  is  the  first  time  a  restriction  has  been  placed  on  real  estate 
loans  in  Georgia.  Until  comparatively  recently  national  banks  were 
not  allowed  to  take  real  estate  security  save  on  debts  previously 
contracted,  but  by  the  Federal  Reserve  Act  (December  23,  1913, 
amended  September  7,  1916),  U.  S.  Comp.  Stat.,  §  9763,  they  were 
authorized  (with  certain  limitations)  to  lend  not  more  than  25  per 
cent,  of  their  capital  and  surplus  or  one-third  of  their  time  deposits 
on  farm  lands  or  improved  real  estate,  within  one  hundred  miles  of 
the  location  of  the  bank,  the  loan  not  to  exceed  50  per  cent,  of  the 
value  of  the  property. 

New  York  makes  similar  restrictions,  §  108  (4),  New  York  law. 

A  loan  made  in  violation  of  this  section  is  nevertheless  valid  and 
enforceable.  McCormick  v.  Market  National  Bank,  165  U.  S.  538, 
41  L.  Ed.  817. 

§  160.     SEC.  16.     Overdrafts. 

Any  officer  or  employee  of  any  bank  who  shall  permit  any  cus- 
tomer of  the  bank  to  overdraw  his  account  or  who  shall  pay  any 
check  or  draft,  the  paying  of  which  shall  overdraw  any  account, 
unless  the  same  shall  be  authorized  by  the  board  of  directors,  or 
by  a  committee  of  such  board  authorized  to  act,  shall  be  per- 
sonally and  individually  liable  to  such  bank  for  the  amount  of 
such  overdraft. 

In  an  early  case  the  Supreme  Court  of  the  United  States  held  that 
an  officer  was  personally  liable  for  an  overdraft  allowed  or  permitted 
by  him,  and  that  even  the  authority  of  the  board  of  directors  would 
not  relieve  him.  Minor  v.  Mechanics'  Bank,  1  Pet.  46,  7  L.  Ed.  47. 
But  the  view  generally  adopted  in  recent  years  is  that  an  overdraft 
is  a  loan,  an  irregular  and  dangerous  kind  of  loan,  but  a  loan 
nevertheless,  and  that  an  officer  authorized  to  make  loans  may  allow 
overdrafts.  Morse  on  Banks  and  Banking,  §§  357  and  358.  This 
section  is  intended  to  limit  and  restrict  the  power  of  officers  with 
respect  to  overdrafts  to  cases  authorized  by  the  directors  or  loan 
committee  of  the  bank. 

§  161.     SEC.  17.     Loans  Upon  Collateral. 

No  bank  shall  lend  more  than  thirty  (30)  per  cent,  of  its 
capital  and  unimpaired  surplus  on  the  stock  of  any  corporation, 
although  such  stock  may  be  pledged  to  it  by  several  separate 
borrowers,  and  where  loans  are  made  direct  to  the  corporation, 
without  ample  security,  these  direct  loans  shall  be  included  in  such 
total  of  thirty  (30)  per  cent.  No  bank  shall  make  a  loan  secured 
by  the  stock  of  another  corporation  if  by  the  making  of  such 
loan  the  total  stock  of  such  corporation  held  by  it  as  collateral 
will  exceed  in  the  aggregate  twenty  (20)  per  cent,  of  the  capital 
stock  of  such  corporation. 
6 


82  PARK'S  BANKING  LAW  otf  GEORGIA. 


The  general  plan  of  §  108  (3)  of  the  New  York  law  is  followed 
in  this  section. 

Where  stock  of  an  incorporated  company  is  pledged  by  the  owner 
as  collateral  security  for  the  payment  of  a  debt,  the  pledgee  is,  as  a 
general  rule,  entitled  to  collect  and  receive  the  dividends  thereon, 
unless  this  right  is  reserved  by  the  pledger  at  the  time  the  pledge  is 
made.  Guarantee  Co.  of  North  America  v.  East  Rome  Town  Co., 
96  Ga.  511. 

§  162.     SEC.  18.     Certificates  of  Deposit. 

No  bank  shall  issue  any  certificate  of  deposit  except  in  ex- 
change for  lawful  money  of  the  United  States,  or  for  checks, 
drafts,  or  bills  of  exchange  which  are  the  actual  equivalent  of 
such  money;  [and  all  certificates  of  deposit  shall  be  signed  by 
an  officer  of  the  bank  and  countersigned  by  another  officer  or 
bonded  employee  thereof.]* 

This  section  is  intended  to  break  up  a  practice,  more  or  less  com- 
mon with  some  banks,  of  issuing  certificates  of  deposit  against  notes 
discounted. 

§  163.     SEC.  19.     Interest  to  Be  Charged. 

Any  bank  may  take,  receive,  reserve  and  charge  on  any  loan 
or  advance  of  money,  or  forbearance  to  enforce  the  collection  of 
money,  interest  at  not  exceeding  eight  per  cent.  (8%)  per  annum. 

As  originally  framed,  this  section  authorized  banks  to  discount  or 
deduct  interest  in  advance  at  eight  per  cent.  The  section  was  so 
framed  to  meet  the  decision  of  the  Supreme  Court  in  Loganville 
Bank  v.  Forrester,  143  Ga.  302,  in  which  it  was  held  that  such  dis- 
count was  usurious  under  Code,  §  3436.  This  was  thought  to  be  de- 
sirable as  national  banks  were  given  the  right  to  deduct  interest 
in  advance  at  the  highest  rate  allowed  bv  the  laws  of  the  State 
where  they  were  located,  §  5197,  U.  S.  R.  S.;  §  9758,  U.  S.  Comp. 
Stat,  and  the  Court  of  Appeals  held,  in  Cooper,  Recr.,  v.  National 
Bank  of  Savannah,  21  Ga.  App.  356,  that  this  section  authorized 
national  banks  in  Georgia  to  discount  at  eight  per  cent.  This  de- 
cision has  recently  been  affirmed  by  the  United  States  Supreme 
Court,  34  Sup.  Ct.  58,  64  L.  Ed.  69.  The  General  Assembly,  how- 
ever, struck  out  the  provision  which  allowed  discount,  leaving  the 
section  as  above.  As  enacted,  the  section  probably  makes  no  change 
in  the  law,  though  the  use  of  the  word  "reserve"  may  possibly  author- 
ize discount  at  eight  per  cent.  To  clear  up  the  doubt  and  put  State 
banks  on  an  equality  with  National  Banks  in  the  matter  of  discount 
an  amendment  was  proposed  at  the  Session  of  1920  making  the 
section  read  as  originally  framed.  But  the  amendment  was  defeated. 
The  contract  rate  in  Georgia  is  eight  per  cent.,  Code,  §  3426,  and 
banks  were  authorized  by  Code,  §  2336,  to  charge  the  same  rates  as 
individuals. 


*Added  by  Act  of  August  14,  1920. 


BANKING  ACT  OF  1919.  83 

§  164.     SEC.  20.     Foreign  and  Domestic  Acceptances. 

A  bank  may  accept  drafts  or  bills  of  exchange  drawn  upon  it 
having  not  more  than  six  months'  sight  to  run,  which  grow  out 
of  transactions  involving  the  importation  or  exportation  of  goods ; 
or  which  grow  out  of  transactions  involving  the  domestic  ship- 
ment of  goods,  provided  shipping  documents  conveying  or  se- 
curing title  are  attached  at  the  time  of  acceptance ;  or  which  are 
secured  at  the  time  of  acceptance  by  a  warehouse  receipt  or  other 
such  document  conveying  or  securing  title  covering  readily  mar- 
ketable staples.  No  bank  shall  accept,  whether  in  a  foreign  or 
domestic  transaction,  for  any  one  person,  company,  firm,  or  cor- 
poration to  an  amount  equal  at  any  time  in  the  aggregate  to  more 
than  ten  per  cent,  of  its  paid-up  and  unimpaired  capital  stock  and 
surplus  unless  the  bank  is  secured  either  by  attached  documents 
or  by  some  other  actual  security  growing  out  of  the  same  trans- 
action as  the  acceptance  and  no  bank  shall  accept  such  bills  to 
an  amount  equal  at  any  time  in  the  aggregate  to  more  than  one- 
half  of  its  paid-up  and  unimpaired  capital  stock  and  surplus. 
Provided,  however,  That  any  bank  which  is  a  member  of  the 
Federal  Reserve  System  may,  when  so  authorized  by  the  Federal 
Reserve  Board,  and  under  the  regulations  prescribed  by  it,  ac- 
cept such  bills  to  an  amount  not  exceeding  one  hundred  per  cent, 
of  its  paid-up  and  unimpaired  capital  stock  and  surplus,  but  the 
aggregate  of  acceptances  growing  out  of  domestic  transactions 
shall  in  no  event  exceed  fifty  per  cent,  of  such  capital  and  surplus. 

The  Federal  Reserve  Act,  §  9796  (5),  U.  S.  Comp.  Stat,  author- 
ized acceptances  by  national  banks.  Georgia  banks  were  given  a 
similar  power  by  the  Act  of  1916,  §  2366  (d),  Park's  Code,  Sup. 
1917.  This  section  follows  closely  the  terms  of  the  Federal  Reserve 
Act.  It  also  makes  special  provision  for  banks  which  are  members 
of  the  Federal  Reserve  System  so  as  to  put  them  on  a  parity  with 
national  banks. 

§  165.     SEC.  21.     Loans  Upon  or  Purchase  of  Bank  Stock. 

No  bank  shall  make  any  loan  or  discount  on  the  security  of 
the  shares  of  its  capital  stock,  nor  be  the  purchaser  or  holder  of 
any  such  shares  unless  such  security  or  purchase  shall  be  neces- 
sary to  prevent  loss  upon  a  debt  previously  contracted  in  good 
faith,  and  said  stock  so  purchased  or  acquired  shall  within  six 
(6)  months  of  the  time  of  its  purchase  be  sold  and  disposed  of  at 
public  or  private  sale.  The  limit  of  time,  however,  may  be  ex- 
tended by  the  Superintendent  of  Banks,  if  in  his  judgment  it  is 
for  the  best  interest  of  the  bank  that  such  extension  be  granted, 


84  PARK'S  BANKING  LAW  OF  GEORGIA. 

but  in  no  case  shall  such  time  be  extended  longer  than  twelve 
(12)  months  from  the  time  of  the  purchase  of  the  same  by  the 
bank. 

This  section  is  taken  from  §  5201,  U.  S.  R.  S. ;  §  9762,  U.  S.  Comp. 
Stat.  The  Federal  Reserve  Act  requires  the  observance  of  this 
restriction  by  state  banks  as  a  condition  of  becoming  members  of 
the  Federal  Reserve  System,  §  9792  (3),  U.  S.  Comp.  Stat.  Code, 
§  2348,  prohibited  banks  from  applying  the  capital  stock  to  the  pur- 
chase of  their  own  shares.  New  York  and  other  states  forbid  banks 
to  make  loans  upon  or  purchase  their  own  stock  §  108  (6),  New 
York  law;  §  29,  Alabama  law. 

"A  solvent  stockholder  of  an  insolvent  corporation  delivered  to  it 
his  shares  of  stock  in  consideration  that  his  note  held  by  the  cor- 
poration, secured  by  his  stock  as  collateral,  be  credited  with  a  given 
amount  considered  by  him  and  the  president  of  the  corporation  as 
a  fair  valuation  of  the  stock;  at  the  time  of  the  transaction  both  the 
stockholder  and  the  president  thought  the  corporation  solvent,  and 
the  shares  of  stock  were  held  by  the  corporation  until  it  made  an 
assignment  for  the  benefit  of  creditors  within  a  month  or  two  there- 
after. Adjudged,  that  the  stockholder  held  the  money  or  credit  so 
received  by  him  subject  to  the  superior  equity  of  the  creditors  of 
the  corporation,  and  that  a  receiver  subsequently  appointed  for  the 
corporation  could  recover  of  the  stockholder,  for  the  benefit  of 
creditors,  the  amount  of  such  credit."  Fitzpatrick  v.  McGregor, 
133  Ga.  332  (2). 

§  166.     SEC.  22.     Unauthorized  Investments. 

No  bank  shall  employ  or  invest  its  funds  in  the  purchase  or 
holding  of  the  stock  of  any  industrial,  mercantile  or  mining  cor- 
poration, or  in  the  purchase  or  handling  of  merchandise,  farm  or 
manufactured  products,  except  to  secure  a  debt  previously  con- 
tracted in  good  faith,  and  if  any  such  stocks,  merchandise,  or 
products  are  purchased  to  protect  the  bank  from  loss,  the  same 
shall  be  disposed  of  at  public  or  private  sale  within  six  (6) 
months  after  receiving  the  same,  or  the  same  shall  be  charged  to 
profit  and  loss  and  not  carried  as  assets  by  the  bank.  The  limit 
of  time,  however,  may  be  extended  by  the  Superintendent  of 
Banks,  if  in  his  judgment  it  is  for  the  best  interest  of  the  bank 
that  such  extension  should  be  granted.  Nothing  in  this  section 
is  to  be  construed  as  applying  to  trust  companies  or  savings  banks 
doing  a  trust  or  savings  business. 

This  seems  to  be  an  original  section.  Even  without  this  express 
prohibition  banks  have  no  power  under  their  charters  to  purchase 
stocks.  There  are,  however,  frequent  calls  upon  banks  to  take  stock 
in  local  enterprises  being  organized  to  benefit  the  community  in 
which  the  bank  solicited  is  located.  This  section  was  framed  to 
prevent  yielding  to  temptation  by  generous  and  public-spirited  bank 
officers. 


BANKING  ACT  OF  1919.  85 

§  167.     Sue.  23.     Purchase  of  Stocks  or  Bonds. 

No  bank  shall  subscribe  or  purchase  any  stocks  (except  stock 
in  the  Federal  Reserve  Bank  or  in  any  State  bank  hereafter  or- 
ganized with  functions  applicable  to  its  members  similar  in  char- 
acter and  effect  to  the  functions  of  the  Federal  Reserve  Bank  to 
its  members,  necessary  to  qualify  for  membership  therein  in 
which  case  the  purchase  of  stock  in  said  State  bank  shall  not 
be  made  unless  the  purchase  has  first  been  approved  by  the 
State  Superintendent  of  Banks  and  the  amount  of  stock  bought 
shall  not  exceed  that  permitted  in  the  Federal  Reserve  Bank) 
or  bonds,  except  bonds  of  the  United  States,  of  the  State  of 
Georgia,  or  of  the  several  counties,  districts,  including  drainage 
districts,  or  municipalities  thereof,  which  have  been  duly  and 
regularly  validated  as  provided  by  law,  or  of  the  other  States  of 
the  United  States  or,  with  the  approval  of  the  Superintendent 
of  Banks,  good  interest-bearing  bonds  of  foreign  governments; 
provided  that  nothing  herein  contained  shall  limit  or  interfere 
with  regularly  authorized  trust  companies,  doing  a  trust  company 
business,  advancing  or  lending  money  on  syndicate  underwritings, 
upon  which  such  trust  companies  are  authorized  to  charge  such 
commissions,  in  addition  to  interest,  as  may  be  agreed  upon  by  the 
parties,  or  from  subscribing,  purchasing  or  holding  stocks,  bonds, 
or  other  securities ;  Provided,  That  this  section  shall  not  apply 
to  securities  actually  owned  at  the  date  of  the  approval  of  this 
act.  Provided  further,  That  any  bank  of  this  State  may  invest 
not  exceeding  five  per  centum  of  its  capital  and  surplus  in  the 
stock  of  a  corporation  engaged  in  the  business,  in  whole  or  in 
part,  of  holding,  marketing  or  exporting  cotton  from  the  United 
States,  or  any  of  its  dependencies,  or  insular  possessions,  to  any 
foreign  country.  But  no  bank  shall  subscribe  to  the  capital  stock 
of  more  than  one  such  corporation,  and  shall  first  receive  the 
approval  of  the  Superintendent  of  Banks.  Provided  further, 
That  nothing  contained  in  this  section  shall  apply  to  savings 
banks  doing  only  a  savings  business. 

Alabama  has  a  restriction  upon  the  purchase  of  bank  stock.  §  29, 
Alabama  act.  This  section  is  much  more  comprehensive.  It  recog- 
nizes, however,  the  right  to  invest  in  bonds  which  are  of  undoubted 
value.  The  proviso  authorizing  the  purchase  of  the  stock  of  an 
export  company  was  inserted  in  view  of  the  pendency  in  Congress 
of  two  bills  to  amend  the  Federal  Reserve  Act  so  as  to  authorize 
similar  investments  by  national  banks,  the  McLean-Platt  Amend- 
ment (approved  Sept.  17,  1919,)  and  the  Edge  Export  Finance  Act 
(approved  Dec.  24,  1919). 


86  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  168.     SEC.  24.     Purposes  for  Which  Banks  May  Hold  Real 
Estate. 

Any  bank  may  purchase,  hold  and  convey  real  estate  for  the 
following  purposes  only :  first,  such  as  shall  be  necessary  for  the 
convenient  transaction  of  its  business,  the  amount  of  which,  in- 
cluding its  furniture  and  fixtures,  shall  not  exceed  one-third  (%) 
of  the  paid-in  unimpaired  capital  and  surplus;  Provided,  That 
the  Superintendent  of  Banks  may,  upon  application  by  any  bank, 
in  his  discretion,  allow  a  greater  sum  invested;  second,  such  as 
shall  be  conveyed  to  it  in  satisfaction  of  debts  previously  contracted 
in  the  course  of  its  business;  third,  such  as  it  shall  purchase 
at  sales  under  judgments,  decrees,  or  mortgage  foreclosures 
under  securities  held  by  it;  but  a  bank  shall  not  bid,  at  any 
such  sale,  a  larger  amount  than  sufficient  to  satisfy  its  debt,  costs 
and  expenses.  No  real  estate  acquired  in  the  cases  contemplated 
in  the  second  and  third  subsections  above  shall  be  held  for  a 
longer  period  than  five  (5)  years  unless  the  time  shall  be  ex- 
tended by  the  Superintendent  for  cause  shown;  Provided,  That 
this  section  shall  not  apply  to  any  banking  house,  furniture  or 
fixtures  actually  owned  at  the  date  of  the  approval  of  this  act. 
Provided  further,  That  nothing  contained  in  this  section  shall 
apply  to  savings  banks  doing  only  a  savings  business. 

This  follows  in  substance,  §  5137,  U.  S.  R.  S. ;  §  9674,  U.  S.  Comp. 
Stat.  The  limit  on  the  value  of  the  banking  house  and  fixtures, 
however,  is  new.  It  is  a  wise  restriction,  especially  since  banks  are 
now  authorized  with  only  $15,000  capital. 

§  169.     SEC.  25.     Restriction  of  Bank's  Liability. 

No  bank  shall  at  any  time  be  indebted  to  an  amount  exceeding 
double  the  amount  of  its  capital  stock  actually  paid  in  and 
remaining  undiminished  by  losses  or  otherwise,  plus  the  amount 
of  the  unimpaired  surplus  and  undivided  profits,  except  on  ac- 
count of  the  following: 

1.  Moneys  deposited  with  or  collected  by  the  bank. 

2.  Bills  of  exchange  or  drafts  drawn  against  money  actually 
on  deposit  to  the  credit  of  the  bank  or  due  thereto. 

3.  Liabilities  to  the  stockholders  of  the  bank  or  dividends  and 
reserve  profits. 

4.  Commercial  paper  re-discounted. 

5.  Acceptances  as  herein  authorized. 

6.  Liabilities  incurred  by  the  bank  on  account  of  the  indorse- 


BANKING  ACT  OF  1919.  87 

ment  of  checks,  drafts  and  bills  of  exchange  received  by  the  bank 
on  deposit,  cashed  or  purchased  by  it,  and  indorsed  by  the  bank. 
Provided,  however,  That  in  case  of  temporary  emergency, 
or  to  pay  its  depositors,  temporary  loans,  in  excess  of  the  amount 
hereinabove  fixed,  may  be  made,  when  approved  in  advance  by 
the  Superintendent  of  Banks. 

This  section  is  based  upon  §  5202,  U.  S.  R.  S. ;  §  9764,  U.  S.  Comp. 
Stat,  as  amended  by  the  Federal  Reserve  Act  and  the  Act  of  Sep- 
tember 7,  1916,  the  items  not  included  in  estimating  a  bank's  liabil- 
ity being  largely  the  same.  The  proviso  is  new. 

§  170.     SEC.  26.     Purchase  of  Bank's  Obligations. 

No  bank,  nor  any  of  its  directors,  officers,  agents  or  employees 
shall  directly  or  indirectly  purchase  or  be  interested  in  the  pur- 
chase of  any  promissory  note,  certificate  of  deposit,  or  other 
evidence  of  debt  issued  by  it,  for  a  less  sum  than  shall  appear 
on  the  face  thereof  to  be  due  thereon:  Provided,  That  a  bank 
may  discount  its  unmatured  obligations  at  not  more  than  the 
legal  rate,  which  obligations  shall  be  cancelled  and  satisfied  forth- 
with. 

Under  an  old  statute  (Act,  1832,  Cobb,  101),  codified  as  Code,  § 
2342,  banks  were  required  to  pay  specie  for  their  bills,  notes,  drafts 
or  other  obligations  when  due ;  to  receive  their  bills,  notes,  certifi- 
cates of  deposit  or  other  evidences  of  debt  in  payment  of  debts  due 
them;  and  to  receive  their  own  bills  at  par.  By  §  207,  Park's  Penal 
Code,  it  was  made  a  crime  for  an  officer  to  purchase  the  bank's 
obligations  at  a  discount.  This  section  is  intended  to  cover  both 
these  sections,  the  penal  section  being  reenacted  also  as  §  215. 

§  171.     SEC.  27.     Reserv.e. 

Every  bank  whose  deposits  are  subject  to  check  shall  at  all 
times  maintain  a  reserve  of  fifteen  (15)  per  cent,  of  the  amount 
of  its  demand  deposits,  and  five  (5)  per  cent,  of  the  amount  of 
its  savings  and  time  deposits.  Savings  banks  and  trust  companies 
whose  deposits  are  not  subject  to  check  without  notice  shall 
maintain  a  reserve  of  five  (5)  per  cent,  of  the  amount  of  their 
deposits.  Such  reserve  shall  consist  of  lawful  money  of  the 
United  States,  gold  certificates,  silver  certificates,  Federal  Re- 
serve, or  national  bank  notes,  in  the  office  and  vaults  of  the  bank, 
and  of  moneys  on  deposit  subject  to  call  with  other  banks  or 
bankers,  such  banks  or  bankers  to  be  approved  by  the  Superin- 
tendent of  Banks :  [provided  that  the  reserve  against  savings  and 
time  deposits  may  be  invested  in  bonds  of  the  United  States  or  of 
this  State  at  the  market  value  thereof  ;]*  Provided,  That  any  bank 


88  PARK'S  BANKING  LAW  OF  GEORGIA. 

which  is  a  member  of  the  Federal  Reserve  System  may  in  lieu  of 
the  reserve  herein  required  keep  and  maintain  such  reserve  as  is 
required  under  the  acts  of  congress  relating  to  Federal  Reserve 
Banks.  Demand  deposits  within  the  meaning  of  this  section  shall 
comprise  all  deposits  payable  within  thirty  days,  and  time  deposits 
shall  comprise  all  deposits  payable  after  thirty  days,  and  all  savings 
accounts  and  certificates  of  deposit  which  are  subject  to  not  less 
than -thirty  days'  notice  before  payment.  [And  provided  that  a 
bank  shall  have  the  right  to  pay  checks  drawn  upon  it  when  pre- 
sented by  any  bank,  banker,  trust  company,  or  agent  thereof, 
either  in  money  or  in  exchange,  drawn  on  its  approved  reserve 
agents,  and  to  charge  for  such  exchange  not  exceeding  one-eighth 
of  one  (1)  per  cent,  of  the  aggregate  amount  of  the  checks  so 
presented  and  paid.]* 

By  Code,  §  2276,  banks  were  required  to  maintain  a  reserve  of  25 
per  cent,  of  their  demand  deposits,  but  the  market  value  of  stocks 
and  bonds  owned  by  the  bank  could  be  treated  as  reserve.  The  Act 
of  1918  (Ga.  Laws,  1918,  p.  134)  authorized  member  banks  to  con- 
form to  the  requirements  of  the  Federal  Reserve  System.  This 
section  follows  the  Federal  Reserve  Act,  §  9801,  U.  S.  Comp.  Stat., 
as  amended,  and  reenacts  in  substance  the  Act  of  1918. 

The  original  proviso  is  intended  to  relieve  the  Georgia  banks  which 
are  members  of  the  Federal  Reserve  System  from  the  necessity  of 
maintaining  the  reserve  required  by  this  act  and  the  reserve  re- 
quired of  members  of  the  system  in  the  event  there  should  be  any 
difference  in  the  two,  and. to  put  such  member  banks  on  a  parity 
with  national  banks. 

Alabama  also  requires  a  fifteen  per  cent,  reserve,  three-fifths  of 
which  may  consist  of  demand  deposits  with  other  banks.  §  19,  Ala- 
bama act. 

§  172.     SEC.  28.     Reserve  Not  Maintained. 

Whenever  the  reserve  of  any  bank  shall  fall  below  the  amount 
of  fifteen  (15)  per  cent,  of  its  demand  deposits  and  five  (5)  per 
cent,  of  its  savings  and  time  deposits,  and  whenever  the  reserve 
of  any  savings  bank  or  trust  company  whose  deposits  are  not 
subject  to  check  shall  be  below  five  (5)  per  cent,  of  its  deposits, 
such  bank,  savings  bank  or  trust  company  shall  not  increase  its 
liabilities  by  making  any  new  loans  or  discounts  otherwise  than 
by  discounting  or  purchasing  bills  of  exchange  at  sight,  nor  shall 
any  dividend  be  declared  out  of  the  profits  of  such  bank,  savings 
bank,  or  trust  company,  until  the  required  proportion  between  the 
aggregate  amount  of  its  deposits  and  the  amount  to  be  held  as  a 
reserve  has  been  restored.  The  Superintendent  of  Banks  may 
notify  any  bank,  savings  bank  or  trust  company,  whose  reserve 

*Both  these  provisos  added  by  Act  of  August  14,  1920. 


BANKING  ACT  OF  1919.  89 

shall  be  below  the  amount  required  to  be  kept  on  hand,  to  make 
good  such  reserve ;  and  if  such  bank,  savings  bank  or  trust  com- 
pany shall  fail  within  thirty  (30)  days  thereafter  to  make  good  its 
reserve,  the  Superintendent  of  Banks  may  take  charge  of  the 
business  and  assets  of  said  bank,  savings  bank  'or  trust  com- 
pany, as  in  other  cases  herein  provided. 

This  is  practically  identical  with  §  5191,  U.  S.  R.  S. ;  §  9746,  U.  S 
Comp.  Stat. 

§  173.     SEX.  29.     Dividends  and  Surplus. 

The  directors  of  any  bank  may,  annually,  semiannually,  or 
quarterly,  declare  a  dividend  of  so  much  of  the  net  profits  of  the 
bank  as  they  may  deem  expedient;  but  such  bank  shall,  before 
the  declaration  of  any  dividend,  carry  twenty-five  (25)  per  cent, 
of  its  profits  earned  since  its  last  preceding  dividend  to  its  surplus 
until  the  surplus  shall  amount  to  twenty  (20)  per  cent,  of  its 
capital.  Each  bank  shall  report  to  the  Superintendent  of  Banks, 
within  ten  (10)  days  after  declaring  and  at  least  ten  (10)  days 
before  paying  any  dividend,  the  amount  of  such  dividend  and 
the  amount  of  net  earnings  in  excess  of  the  dividend  and  amount 
carried  to  the  surplus.  Such  report  shall  be  attested  by  the  oath 
of  the  president  or  cashier  of  the  bank. 

This  section  follows  §  5199,  U.  S.  R.  S. ;  §  9760,  U.  S.  Comp.  Stat, 
which  requires  the  setting  aside  of  ten  per  cent,  of  the  earnings 
until  a  surplus  of  twenty  per  cent,  is  accumulated. 

"The  natural  increase  of  the  property  belongs  to  the  tenant  for 
life.  Any  extraordinary  accumulation  of  the  corpus — such  as  issue 
of  new  stock  upon  the  share  of  an  incorporated  or  joint-stock  com- 
pany— attaches  to  the  corpus  and  goes  with  it  to  the  remainderman." 
Code,  §  3667. 

§  174.     SEC.  30.     Unearned  Dividends  Prohibited. 

No  bank  shall  withdraw  or  permit  to  be  withdrawn  either  in 
the  form  of  dividends  or  otherwise  any  portion  of  its  capital  nor 
reduce  its  surplus  below  twenty  (20)  per  cent,  of  its  capital.  If 
losses  have  been  sustained  at  any  time  by  such  bank  equal  to 
or  exceeding  its  undivided  profits  then  on  hand,  no  dividend 
shall  be  declared,  and  no  dividends  shall  ever  be  declared  by 
any  bank  to  an  amount  greater  than  its  undivided  profits  then 
on  hand,  deducting  therefrom  its  losses  and  bad  debts.  All 
debts  due  to  any  bank  on  which  interest  is  past  due  and  unpaid 
for  a  period  of  twelve  (12)  months,  unless  the  same  are  well 


90  PARK'S  BANKING  LAW  OF  GEORGIA. 

secured  or  in  process   of   collection,   shall  be  considered   "bad 
debts"  within  the  meaning  of  this  section. 

This  section  is  in  the  language  of  §  5204,  U.  S.  R.  S. ;  §  9766, 
U.  S.  Comp.  Stat.  The  Federal  Reserve  Act  prescribes  as  one  of 
the  conditions  under  which  State  banks  may  become  members  of  the 
Federal  Reserve  System  that  they  be  required  to  conform  to  this 
section  of  the  Revised  Statutes.  §  9792  (3),  U.  S.  Comp.  Stat. 

Code,  §§  2348  and  2225  (a)  prohibited  the  declaration  of  divi- 
dends except  from  net  profits,  and  §  208,  Penal  Code,  made  the  pay- 
ment of  such  dividends  a  misdemeanor. 

See  notes  to  §  217. 

§  175.     SEC.  31.     Dividend,  How  Declared  and  When  Losses 
Reduce  Surplus. 

Any  losses  sustained  by  any  bank  in  excess  of  its  undivided 
profits  may  be  charged  up  to  its  surplus  account ;  Provided,  That 
its  surplus  shall  thereafter  be  reimbursed  from  its  earnings,  and 
no  dividend  shall  be  declared  or  paid  by  any  such  bank  in  excess 
of  one-half  (y2)  of  its  net  earnings  until  its  surplus  shall  be  fully 
restored  to  its  former  amount. 

This  is  an  original  section,  its  purpose  being  to  require  the  restora- 
tion of  impaired  surplus. 

§  176.     SEC.  32.     Calculation  of  Profits. 

Interest  unpaid,  although  due  or  accrued  on  debts  owing  to  the 
bank,  shall  not  be  included  in  the  calculation  of  its  profits  pre- 
vious to  a  dividend,  unless  such  interest  be  accrued  upon  loan 
secured  by  collaterals  as  provided  for  by  this  act.  The  undivided 
profits  from  which  alone  a  dividend  can  be  made,  shall  be  ascer- 
tained by  charging  in  the  account  of  profit  and  loss  and  deducting 
from  the  actual  profits : 

1.  All  expenses  paid  or  incurred,  both  ordinary  and  extraor- 
dinary, including  taxes,  attending  the  management  of  the  affairs 
of  the  bank,  and  the  transaction  of  its  business. 

2.  The  interest  paid,  or  then  due  and  accrued,  on  debts  owing 
by  it. 

3.  All  losses  sustained  by  it.     In  the  computation  of   such 
losses,  there  shall  be  included  all  debts  owing  to  the  bank  which 
shall  have  been  due,  without  suit  for  twelve  (12)  months,  and 
upon  which  no  interest  shall  have  been  paid  during  that  period, 
except  such  debts  as  in  the  opinion  of  the  Superintendent  are 
well  secured.     There  shall  also  be  included  in  such  computa- 
tion all  debts  due  the  bank  on  which  judgment  shall  have  been 


BANKING  ACT  OF  1919.  91 

recovered,  which  judgment  shall  have  remained  for  more  than 
one  (1)  year  unsatisfied,  and  on  which  no  interest  shall  have 
been  paid  during  that  period. 

This  is  taken  substantially  from  §  116  of  the  New  York  law. 

§  177.     SEC.  33.     Lien  Against  Bank  for  Collaterals. 

When  any  bank  is  indebted  to  any  other  party  and  shall  deposit 
with  such  party  any  commercial  paper  or  papers  as  collateral  for 
its  debt,  and  such  collateral  shall  be  afterwards  sent  back  to  the 
bank  in  order  that  it  may  be  collected  and  the  funds  remitted 
by  the  bank  to  the  creditor,  the  holder  of  the  bona  fide  receipt 
of  the  bank  for  such  paper  to  be  so  collected,  shall,  after  any 
such  collections  are  made,  but  not  paid  over,  have  a  lien  against 
the  assets  of  the  bank  to  the  extent  of  such  funds  as  have  been 
actually  collected  by  the  bank,  and  such  lien  shall  rank  with 
other  liens  according  to  date  and  shall  attach  from  the  date  of 
the  collection  of  any  such  fund  by  such  bank. 

This  is  a  reenactment  of  Code,  §  2354  (Acts  1905,  p.  100).  The 
act  was  held  to  be  constitutional  in  Collins  v.  American  Exchange 
National  Bank,  147  Ga.  273. 

§  178.     SEC.  34.     Lien  on  Banks'  Assets  When  Checks  Are 
Not  Remitted. 

When  any  bank,  or  any  officer,  clerk,  or  agent  thereof,  receives 
by  mail,  express  or  otherwise,  a  check,  bill  of  exchange  order  to 
remit  note,  or  draft  for  collection,  with  request  that  remittance 
be  made  therefor,  the  charging  of  such  item  to  the  account  of  the 
drawer,  acceptor,  indorser,  or  maker  thereof  or  collecting  any 
such  item  from  any  bank  or  other  party,  and  failing  to  remit 
therefor,  or  the  nonpayment  of  a  check  sent  in  payment  therefor, 
shall  create  a  lien  in  favor  of  the  owner  of  such  item  on  the 
assets  of  such  bank  making  the  collection,  and  such  lien  shall  rank 
with  other  liens,  according  to  date,  and  shall  attach  from  the 
date  of  the  charge,  entry  or  collection  of  any  such  funds. 

In  Ober  &  Sons  Co.  v.  Cochran,  118  Ga.  396,  it  was  held  that 
where  a  note  was  sent  to  a  bank  for  collection  with  instructions  to 
remit  the  proceeds,  but  the  bank  violated  instructions,  and  used  the 
money  in  its  own  business,  upon  the  insolvency  of  the  bank  no  trust 
resulted  in  favor  of  the  owner  of  the  note  upon  the  assets  of  the 
bank  in  the  hands  of  a  receiver.  Similar  rulings  were  made  in 
Citizens'  National  Bank  v.  Haynes,  144  Ga.  490,  and  in  U.  S.  Na- 
tional bank  v.  Glandon,  146  Ga.  786.  It  was  to  meet  these  cases  that 
this  section  was  inserted. 


92  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  179.     SEC.  35.     Due  Diligence  on  Part  of  Bank  in  Collect- 
ing. 

When  a  check,  draft,  note,  or  other  negotiable  instrument  is 
deposited  in  a  bank  for  credit,  or  for  collection,  it  shall  be  con- 
sidered due  diligence  on  the  part  of  the  bank  in  the  collection  of 
such  check,  draft,  note  or  other  negotiable  instrument  so  de- 
posited,  to  forward  and  route  the  same  without  delay  in  the  usual 
commercial  way,  according  to  the  regular  course  of  business  of 
banks,  and  the  maker,  indorser,  guarantor,  or  surety  of  any 
check,  draft  note  or  other  negotiable  instrument  so  deposited  shall 
be  liable  to  the  bank  until  actual  final  payment  is  received ;  and 
when  a  bank  receives  for  collection  any  check  draft,  note,  or  other 
negotiable  instrument  and  forwards  the  same  for  collection  as 
herein  provided,  it  shall  be  liable  only  after  actual  final  payment 
is  received  by  it,  except  in  case  of  want  of  due  diligence  on  its 
part  as  aforesaid. 

The  courts  of  the  country  have  divided  with  respect  to  the  liability 
of  a  collecting  bank.  By  some  it  has  been  held  that  a  collecting 
bank  is  liable  for  the  defaults  of  its  agents  and  correspondents. 
Others  have  taken  the  view,  more  in  keeping  with  modern  business 
methods,  that  the  forwarding  bank  is  only  liable  for  its  own  neglect 
and  defaults  where  it  exercises  proper  care  in  the  selection  of  cor- 
respondents and  means  of  collection,  the  correspondents  and  agents 
being  regarded  as  the  agents  of  the  depositor  rather  than  of  the  col- 
lecting bank.  The  Supreme  Court  of  Georgia  in  Bailie  v.  Augusta 
Savings  Bank,  95  Ga.  277,  adopted  the  first  of  these  theories,  Code, 
§  2362,  codified  from  this  decision  being  as  follows : 

"In  the  absence  of  a  contract,  express  or  implied,  to  the  contrary, 
a  bank  taking  paper  for  collection  is  liable  for  the  defaults  of  its 
agents  and  correspondents  to  whom  the  paper  has  been  intrusted 
for  collection." 

This  section  in  effect  overrules  the  Bailie  case  and  adopts  the 
second  of  the  above  given  theories. 

§  180.     SEC.  36.     Forwarding  Check  Direct  to  Payor. 

Any  bank,  or  banker,  doing  business  in  this  State,  receiving 
for  collection  or  deposit,  any  check,  note,  or  other  negotiable  in- 
strument, drawn  upon  or  payable  at  any  other  bank  located  in 
another  city  or  town  whether  within  or  without  this  State  may 
forward  such  instrument  for  collection  directly  to  the  bank  on 
which  it  is  drawn  or  at  which  it  is  made  payable  and  such 
method  of  forwarding  direct  to  the  payor  shall  be  deemed  due 
diligence  and  the  failure  of  any  such  payor  bank,  because  of 
its  insolvency  or  other  default,  to  account  for  the  proceeds 
thereof,  shall  not  render  the  forwarding  bank  liable  therefor: 
Provided,  however,  Such  forwarding  bank  shall  have  used  due 


BANKING  ACT  OF  1919.  93 

diligence  in  other  respects  in  connection  with  the  collection  of 
such  instrument. 

Under  the  rule  generally  adopted  by  the  courts  a  bank  forwarding 
a  check  or  other  item  direct  to  the  drawee  or  payor  is  guilty  of  neg- 
ligence and  responsible  for  any  loss  which  may  result.  The  custom 
among  banks,  however,  has  sanctioned  the  practice  of  forwarding 
items  direct  to  the  payor.  In  Georgia  where  there  are  many  small 
towns  in  which  there  is  only  one  bank,  this  is  the  only  practical 
method  of  collection.  This  section  legalizes  the  custom  generally 
prevailing.  A  similar  statute  has  been  adopted  in  Alabama,  Louisi- 
ana, Montana,  and  possibly  other  States. 

§  181.     SEC.  37.     Certifying  Checks. 

No  check  shall  be  certified  except  by  the  president,  a  vice- 
president,  cashier,  or  an  assistant  cashier  of  a  bank.  It  shall  be 
unlawful  to  certify  any  check,  draft,  or  order  upon  the  bank 
unless  the  drawer  of  such  check,  draft,  or  order  has  on  deposit 
with  the  bank,  at  the  time  such  check,  draft,  or  order  is  certified, 
an  amount  of  money  equal  to  the  amount  specified  in  such  check, 
draft  or  order.  Such  certification  shall  be  entered  on  the  face 
of  such  check,  draft  or  order,  and  the  check,  draft  or  order  so 
certified  shall  be  charged  against  the  drawer's  account  immedi- 
ately. Any  check  certified  by  a  proper  officer  shall  be  a  good  and 
valid  obligation  against  the  bank ;  but  the  act  of  any  officer  in 
violation  of  this  section  shall  subject  him  to  the  penalties  provided 
in  this  act. 

This  reenacts  in  substance  Code,  §  2301,  which  in  turn  was  copied 
from  §  5208,  U.  S.  R.  S. ;  §  9770  U.  S.  Comp.  Stat.  §  5208  has 
been  amended  by  the  Act  of  Sept.  26,  1918,  §  9770,  U.  S.  Comp. 
Stat.,  so  as  to  apply  to  Federal  Reserve  Banks  and  member  banks. 

It  has  been  the  practice  for  tellers  of  some  banks  to  certify  checks, 
but  the  courts  have  generally  held  that  a  teller  has  no  implied  power 
to  certify.  This  section  limits  the  power  to  the  proper  officers. 

§  182.     SEC.  38.     Membership  in  Federal  Reserve  Bank. 

Banks  are  authorized  and  empowered  to  subscribe  for  stock 
and  become  members  of  the  Federal  Reserve  Bank  of  the  dis- 
trict to  which  they  properly  may  be  assigned  by  the  Federal  Re- 
serve Board,  in  accordance  with  the  acts  of  congress  regulating 
Federal  Reserve  Banks,  and  any  bank  becoming  such  member 
shall  be  authorized  to  conform  to  the  requirements  and  regula- 
tions of  such  Federal  Reserve  Bank,  and  of  the  Federal  Reserve 
Board. 

The  Federal  Reserve  Act,  December  23,  1913,  as  amended  by  the 
Act  of  June  21,  1917,  §  9792,  U.  S.  Comp.  Stat.,  makes  full  provision 


94  PARK'S  BANKING  LAW  OF  GEORGIA. 

for  the  membership  of  State  banks  in  the  Federal  Reserve  System, 
and  prescribed  the  terms  and  conditions  of  such  membership.  By 
the  Act  of  1915,  p.  33,  §  2366  (a),  Park's  Code,  Sup.  1917,  banks 
incorporated  under  the  laws  of  Georgia  were  authorized  to  sub- 
scribe for  stock  in  and  become  members  of  the  Federal  Reserve 
Bank  of  this  district.  This  section  is  similar  though  somewhat 
broader  in  its  terms  than  Code,  §  2366  (a).  Similar  statutes  have 
been  adopted  in  most  of  the  States. 

§  183.     SEC.  39.     Payment  of  Deposits  in  Two  Names. 

When  a  deposit  has  been  made,  or  shall  hereafter  be  made,  in 
any  bank  transacting  business  in  this  State  in  the  names  of  two 
persons,  payable  to  either,  or  payable  to  either  or  the  survivor, 
such  deposit,  or  any  part  thereof,  or  any  interest  or  dividend 
thereon,  may  be  paid  to  either  of  said  persons,  whether  the  other 
be  living  or  not;  and  the  receipt  or  acquittance  of  the  person  so 
paid  shall  be  a  valid  and  sufficient  release  and  discharge  to  the 
bank  for  any  payment  so  made. 

In  the  absence  of  a  statute,  the  courts  generally  have  held  that  a 
deposit  in  the  name  of  two  parties  belongs,  presumptively,  to  them 
equally,  and  upon  the  death  of  one  of  them  his  half  interest  passes 
to  his  personal  representative.  This  section  is  intended  to  give  the 
bank  clear  legal  authority  for  the  payment  of  such  a  deposit  to  the 
survivor  of  the  two  joint  depositors.  Similar  statutes  have  been 
enacted  in  thirty-two  States. 

§  184.     SEC.  40.     Check  of  Deceased  or  Bankrupt  or  Insane 
Depositor. 

The  death  or  bankruptcy  of  a  depositor  unknown  to  the  bank 
shall  not  revoke  a  check  given  by  him,  and  a  bank  shall  be  au- 
thorized to  pay  through  regular  channels  a  check  regularly  drawn 
upon  it  by  a  depositor  therein,  notwithstanding  the  death  or 
bankruptcy  of  such  depositor  unknown  to  the  bank  at  the  time  of 
such  payment.  A  bank  paying  the  check  of  an  insane  depositor 
in  good  faith  and  without  notice  or  knowledge  of  the  insanity  of 
such  depositor  shall  be  protected  in  so  doing  and  may  lawfully 
charge  such  check  to  the  account  of  such  depositor. 

The  rule  adopted  by  the  courts  generally  is  that  death  revokes  a 
check  and  that  a  bank  paying  a  check  after  the  death  of  the  drawer, 
although  in  good  faith  and  without  notice  of  his  death,  is  not  pro- 
tected. This  is  also  the  rule  with  respect  to  the  bankruptcy  of  the 
drawer.  An  insane  person  not  being  able  to  contract,  (Code,  § 
4237,)  could  not  legally  withdraw  a  deposit  by  check,  and  a  bank 
paying  such  check,  though  the  fact  of  the  drawer's  insanity  was  un- 
known to  it,  was  not  protected  in  so  doing.  American  Tr.  &  Bkg. 
Co.  v.  Boone,  102  Ga.  202.  These  rules  which  were  manifestly  un- 
just to  the  bank  are  intended  to  be  corrected  by  this  section. 


BANKING  ACT  of  1919.  95 

§  185.     SEC.  41.     Deposits  by  Minors. 

A  minor  shall  be  allowed  to  deposit  money  in  bank  in  his  own 
name,  and  the  money  so  deposited  shall  not  be  subject  to  the  con- 
trol of  his  parent,  guardian,  or  trustee,  but  may  be  drawn  or 
checked  out  by  the  minor  depositing  the  same  as  though  he  were 
of  full  age. 

Under  the  Code,  the  contracts  of  an  infant,  i.  e.,  one  under 
twenty-one  years  of  age,  are  voidable  by  him  except  in  a  few  cases. 
Code,  §  4233.  As  the  opening  of  a  bank  account  and  checking 
thereon  is  a  contract,  a  bank  accepting  an  account  from  a  minor  did 
so  at  considerable  risk.  This  section  provides  another  exception  to 
the  general  rule,  making  voidable  the  contracts  of  an  infant. 

§  186.     SEC.  42.     Deposit  by  Agent,  Trustee,  or  Other  Fidu- 
ciary. 

Whenever  any  agent,  administrator,  executor,  guardian,  trus- 
tee, either  express  or  implied,  or  other  fiduciary  whether  bona 
fide  or  mala  fide  shall  deposit  any  money  in  any  bank  to  his  credit 
as  an  individual  or  as  such  agent,  trustee,  or  other  fiduciary, 
whether  the  name  of  the  person  or  corporation  for  whom  he 
is  acting  or  purporting-  to  act  be  given  or  not,  such  bank  shall  be 
authorized  to  pay  the  amount  of  such  deposit  or  any  part  thereof, 
upon  the  check  of  such  agent,  administrator,  executor,  guardian, 
trustee,  or  other  fiduciary,  signed  with  the  name  in  which  such 
deposit  was  entered,  without  being  accountable  in  any  way  to 
the  principal,  cestui  que  trust,  or  other  person  or  corporation 
who  may  be  entitled  to  or  interested  in  the  amount  so  deposited. 

Nothing  herein  contained  shall  prevent  the  person  or  corpora- 
tion claiming  the  beneficial  interest  in  or  to  any  deposit  in  any 
bank  from  resorting  to  the  courts  to  subject  such  deposit,  pro- 
vided such  action  is  brought  and  served  before  such  deposit  is 
paid  out,  and  to  any  action  brought  for  this  purpose  both  the 
bank  and  the  depositor  shall  be  necessary  parties  defendant. 

This  section  puts  in  the  form  of  a  statute  a  rule  established  by 
the  decisions  of  the  Supreme  Court  in  Munnerlyn  v.  Augusta  Sav. 
Bank,  88  Ga.  333;  America  Tr.  &  Bkg.  Co.  v.  Boone,  102  Ga.  202, 
and  other  cases.  It  should  be  remembered,  however,  that  these 
cases  also  hold  that  a  bank  actively  aiding  a  trustee  or  agent  in 
misappropriating  a  trust  fund  deposited  by  him,  and  especially  if 
it  participates  in  the  misappropriation  and  receives  the  fruits  of  it 
by  obtaining  the  payment  of  a  debt  due  it  by  the  trustee  or  agent 
individually  is  liable  to  the  true  owner  for  the  amount  so  wrongfully 
appropriated  to  its  own  uses.  While  this  section  protects  a  bank  act- 
ing in  good  faith,  it  is  not  intended  to  shield  a  bank  which  know- 
ingly participates  in  a  misappropriation  by  an  agent,  trustee  or  other 
fiduciary. 


96  PARK'S  BANKING  LAW  OE  GEORGIA. 

§  187.     SEC.  43.     Payment  of  Deposits  in  Trust. 

Whenever  any  deposits  shall  be  made  in  any  bank  by  any 
person  in  trust  for  another,  and  no  other  or  further  notice  of  the 
existence  and  terms  of  a  legal  and  valid  trust  shall  have  been 
given  in  writing  to  the  bank,  in  the  event  of  the  death  of  the 
trustee,  the  same,  or  any  part  thereof,  together  with  the  dividends 
or  interest  thereon  may  be  paid  to  the  person  for  whom  said  de- 
posit was  made. 

Similar  statutes  have  been  enacted  in  twenty-four  States.  The 
section  is  intended  to  protect  the  bank  in  paying  to  the  beneficial 
owner  funds  deposited  for  his  benefit  upon  the  death  of  the  trustee. 

§  188.     SEC.  44.     Forged  or  Raised  Checks. 

No  bank  which  in  good  faith  has  paid,  and  charged  to  the  ac- 
count of  a  depositor,  any  money  on  a  forged  or  raised  check 
issued  in  the  name  of  the  depositor  shall  be  liable  to  said  de- 
positor for  the  amount  paid  thereon,  unless,  (1)  within  sixty 
(60)  days  after  the  return  to  the  depositor  of  the  voucher  repre- 
senting such  payment,  the  depositor  shall  notify  the  bank  that 
the  check  so  paid  was  forged  or  raised,  or,  (2)  in  the  event  the 
voucher  has  not  been  returned  to  the  depositor,  within  sixty  days 
after  notice  shall  have  been  given  by  the  bank  to  the  depositor  to 
have  his  pass  book  balanced  and  to  call  for  his  vouchers.  The 
notice  herein  referred  to  may  be  given  by  mail  to  said  depositor 
at  his  last  known  address. 

The  well-known  rule  is  that  a  bank  paying  a  forged  or  raised 
check  of  its  depositor  can  not  charge  the  amount  to  his  account,  but 
must  itself  bear  the  loss,  provided  the  depositor  has  been  free  from 
blame  and  has  not  contributed  to  the  forgery  by  his  own  negligence. 
Ga.  R.  R.  &  Bkg.  Co.  v.  Love,  etc.,  Society,  85  Ga.  293;  Atlanta 
National  Bank  v.  Burke,  81  Ga.  597;  Woods  v.  Colony  Bank,  114 
Ga.  683.  The  purpose  of  this  section  is  to  fix  a  limit  of  time  within 
which  the  depositor  must  give  notice  of  the  forgery  or  alteration 
after  his  account  has  been  balanced  and  the  opportunity  for  detec- 
tion has  been  afforded  him.  Similar  statutes  have  been  enacted  in 
twenty-two  States,  the  period  of  time  varying  from  thirty  days  to 
one  year  after  the  return  of  the  vouchers. 

§  189.     SEC.  45.     List  of  Stockholders  to  Be  Sent  to  Superin- 
tendent of  Banks. 

The  president  and  cashier  of  every  bank  shall  cause  to  be  kept 
at  all  times,  in  the  office  where  its  business  is  transacted,  a  full 
and  correct  list  of  the  names  and  residences  of  all  the  stockhold- 
ers in  the  bank,  with  the  number  of  shares  held  by  each,  respec- 


BANKING  ACT  OF  1919.  97 

tively.  Such  list  shall  be  subject  to  the  inspection  of  all  stock- 
holders of  the  bank  during  business  hours  of  each  day  in  which 
business  may  be  legally  transacted.  A  copy  of  such  list,  verified 
by  oath  of  such  president  or  cashier,  shall  be  transmitted  on  the 
first  Monday  in  July  of  each  year,  to  the  Superintendent  of 
Banks,  such  copy  list  also  to  be  subject  to  inspection  as  herein- 
above  provided. 

This  is  a  reenactment  of  Code,  §  2307,  codified  from  the  Bank 
Bureau  Act,  and  modelled  after  §  5210,  U.  S.  R.  S.;  §  9773,  U.  S. 
Comp.  Stat. 

§  190.     Sec.  46.     Transfers  After  or  in  Contemplation  of  In- 
solvency. 

All  transfers  of  notes,  bonds,  bills  of  exchange,  or  other  evi- 
dence of  debt  owing  to  any  bank,  or  deposits  to  its  credit;  all 
assignments,  mortgages,  conveyances  or  liens;  all  judgments 
or  decrees  suffered  or  permitted  against  it ;  all  deposits  of  money, 
bills  or  other  value  things  for  its  use,  or  for  the  use  of  its  stock- 
holders or  creditors ;  and  all  payments  of  money,  either  after  in- 
solvency or  in  contemplation  of  insolvency,  with  a  view  to  prevent 
application  of  its  assets  in  the  manner  prescribed  in  this  act,  or 
with  a  view  to  the  preference  of  one  creditor  over  another,  shall 
be  null  and  void,  provided  such  acts  enumerated  were  committed 
within  three  months  prior  to  the  failure  of  such  bank. 

Conveyances  and  transfers  after  or  in  contemplation  of  insol- 
vency were  declared  fraudulent  and  void  by  Code,  §  2360.  This 
section  is  somewhat  broader  and  more  definite  in  its  terms,  follow- 
ing in  substance  the  Bankruptcy  Act,  §  67. 

"Where  a  bank,  after  cashing  several  checks  drawn  upon  another 
bank,  received  from  the  drawee  bank  a  check  covering  the  amounts 
paid  out,  and  then  presented  the  check  thus  given  for  payment,  and 
received  therefor,  instead  of  cash,  a  promissory  note  payable  to 
the  drawee  bank,  which  was  insolvent  at  the  time  and  closed  its 
doors  two  days  later,  the  transaction  was  not  necessarily  invalid, 
but  the  title  to  the  note  passed  to  the  purchaser  thereof,  where  there 
was  no  fraudulent  intent  upon  its  part  and  it  took  without  notice  of 
the  insolvency  of  the  other  bank.  The  check  which  it  surrendered 
was  a  valuable  consideration  for  the  note  received,  and  was  not,  as  a 
matter  of  law,  the  same  as  a  preexisting  debt,  so  as  to  make  the 
transfer  of  the  note  a  preference  by  the  insolvent  bank."  Thomas  v. 
Crawford,  147  Ga.  437  (1). 

"The  provisions  of  the  Code,  §  2360,  which  prohibits  all  convey- 
ances and  assignments  by  a  bank  in  contemplation  of  insolvency  or 
after  insolvency,  except  for  the  benefit  of  all  creditors  and  stock- 
holders, is  intended  to  prevent  preferences  for  an  antecedent  debt, 
and  has  no  application  against  an  innocent  assignee  for  value,  with- 
out knowldege  of  such  condition  of  the  bank.  Booth  v.  Atlanta 
Clearing  House,  132  Ga.  100  (63  S.  E.  907)  ;  Hightower  v.  Mustian, 
8  Ga.  506;  Clarke  y.  Ingram,  107  Ga.  565,  576  (33  S.  E.  802)." 
Toomey  Bros.  v.  Citizens'  and  Southern  Bank,  19  Ga.  App.  271. 
7 


98  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  191.     SEC.  47.     Savings  Deposits ;  Regulations;  Limitations. 

Sums  deposited  with  any  savings  bank  and  savings  deposits 
taken  by  any  bank  doing  both  a  commercial  and  savings  bank 
business,  together  with  interest  credited  thereto,  shall  be  repaid 
to  the  depositors,  respectively,  or  to  their  legal  representatives, 
after  demand,  in  such  manner  and  at  such  times  and  after  such 
previous  notice  and  under  such  regulations  as  the  board  of  di- 
rectors of  such  bank  shall  prescribe,  and  interest  thereon  shall 
be  credited  at  such  times  and  at  such  rates  and  under  such  regu- 
lations as  may  be  prescribed  by  said  board  of  directors.  The 
rules  and  regulations  adopted  by  the  board  of  directors  governing 
deposits  shall  be  printed  in  the  pass  books  or  other  evidences  of 
deposit  furnished  by  such  bank,  and  shall  be  evidence  between  the 
bank  and  the  depositors  holding  the  same  of  the  terms  upon 
which  the  deposits  therein  acknowledged  are  made.  A  bank 
receiving  savings  deposits  may  limit  the  aggregate  amount  which 
any  one  person,  firm,  association  or  corporation,  may  deposit  to 
such  sum  as  it  may  deem  expedient  to  receive,  and  may  in  its 
discretion  refuse  to  receive  any  deposit,  and  may  also  at  any  time 
return  all  or  any  part  of  any  deposit  with  the  interest  accrued 
thereon,  according  to  the  rules  and  regulations  adopted  by  said 
bank.  Where  a  bank  does  both  a  commercial  and  savings  busi- 
ness separate  records  shall  be  kept  of  its  savings  deposits. 

This  section  follows  rather  closely  §  248  of  the  New  York  act. 
The  right  of  a  bank  accepting  savings  accounts  to  prescribe  reason- 
able rules  binding  on  the  depositor  has  been  upheld  in  Langdale  v. 
Citizens'  Bank,  121  Ga.  105,  and  Wilson  v.  Citizens  &  Southern  Bank, 
23  Ga.  App.  654.  The  rule  in  question  in  these  cases  and  which  was 
held  to  be  a  reasonable  regulation,  was :  "Every  effort  will  be  made 
to  protect  depositors  against  fraud,  but  payment  made  to  a  person 
presenting  the  pass  book  shall  be  good  and  valid  on  account  of  the 
owner  unless  the  pass  book  has  been  lost  and  notice  in  writing 
given  to  this  bank  before  such  payment  is  made." 

§  192.     SEC.  48.     Payment  of  Deposit  of  Deceased  Depositor. 

Upon  the  death  of  any  person,  intestate,  having  a  deposit  in 
a  bank  of  not  more  than  $100,  such  bank  shall  be  authorized  to 
pay  over  such  deposit  (a)  to  the  husband  or  wife  of  the  depositor, 
(b)  if  no  husband  or  wife,  to  the  children,  (c)  if  no  children,  to 
the  father  if  living,  if  not  to  the  mother  of  the  depositor,  (d)  if 
no  children  or  parent,  then  to  the  brothers  and  sisters  of  the 
depositor.  The  receipt  of  such  person  or  persons  shall  be  a  full 
and  final  acquittance  to  the  bank  and  relieve  it  of  all  liability  to 


BANKING  ACT  OF  1919.  99 

the  estate  of  said  deceased  depositor  or  the  representative  thereof 
should  one  be  appointed. 

This  section  follows  in  general  plan  Code,  §§  3134-36,  authorizing 
certain  corporations  to  pay  over  to  the  widow  and  children  without 
administration,  wages  due  a  deceased  employee.  The  provision  will 
be  quite  valuable  in  that  large  class  of  small  accounts  where  the  de- 
positor has  no  other  property  and  the  cost  of  administration  is  out 
of  proportion  to  the  amount  of  the  deposit. 

Alabama,  since  the  passage  of  this  act,  has  adopted  a  statute  simi- 
lar to  the  above  section  authorizing  the  payment  to  the  widow  or 
heirs  of  a  depositor  of  deposits  of  $1,000.00  or  less. 


ARTICLE  XX. 

Crimes  and  Misdemeanors. 

§  193.     SECTION  1.     Giving  Notice  of  Examination. 

Any  Superintendent  of  Banks,  Assistant  Superintendent,  Ex- 
aminer, or  office  assistant,  who  shall,  previous  to  the  visitation  of 
any  bank  for  regular  examination,  give  notice  or  information, 
directly  or  indirectly,  to  any  officer,  director,  agent,  represent- 
ative, or  employee  of  such  bank,  as  to  the  time  when  the  same 
will  be  visited  for  examination,  shall  be  guilty  of  a  misdemeanor. 
Provided,  That  this  section  shall  not  apply  to  special  examina- 
tions made  at  the  request  of  any  bank  or  on  motion  of  the  super- 
intendent. 

This  is  taken  from  §  35  of  the  Alabama  law. 

§  194.     Sec.  2.     Disclosing  Condition  of  Bank. 

Any  Superintendent  of  Banks,  Assistant  Superintendent,  Ex- 
aminer, or  office  assistant,  who  shall  knowingly  and  wilfully  dis- 
close the  condition  and  affairs  of  any  bank  ascertained  by  exami- 
nation, except  to  the  extent  authorized  by  law,  shall  be  guilty  of 
a  misdemeanor. 

This  follows  §  36  of  the  Alabama  law.  The  Federal  Reserve  Act, 
as  amended,  §  9833,  U.  S.  Comp.  Stat.,  makes  it  a  misdemeanor  for 
an  examiner  to  disclose  the  names  of  borrowers  or  the  collateral 
for  loans  of  a  member  bank.  This  section  covers  these  as  well  as 
any  other  disclosures  of  the  affairs  of  a  bank. 

§  195.     SEC.  3.     False  Report  of  Examination  by  Examiner. 

Any  Superintendent  of  Banks,  or  Examiner,  who  shall  make 
report  as  to  the  result  of  any  examination  made  by  him,  which 


100  PARK'S  BANKING  LAW  OF  GEORGIA. 

is  knowingly  and  wilfully  false,  shall  be  punished  by  confinement 
and  labor  in  the  penitentiary  for  not  less  than  one  (1)  year  nor 
more  than  five  (5)  years. 

This  follows  §  37  of  the  Alabama  law. 

i 

§  196.     SEC.  4.     Neglect  and  Misconduct  of  Superintendent, 
Examiner,  or  Clerk. 

Any  Superintendent  of  Banks,  Assistant  Superintendent,  Ex- 
aminer, or  office  assistant,  who  shall  wilfully  neglect  to  perform 
any  duties  required  by  him  by  law  or  who  shall  knowingly  and 
wilfully  make  any  false  statement  of  or  concerning  any  bank, 
or  who  shall  be  guilty  of  any  misconduct  or  corruption  in  office, 
shall  be  punished  as  for  a  misdemeanor,  and  upon  conviction, 
shall  be  removed  from  office  by  the  Governor. 

This  reenacts  §  622,  Penal  Code,  codified  from  the  Bank  Bureau 
Act. 

§  197.     SEC.  5.     False  Expense  Account. 

Any  Superintendent  of  Banks,  Assistant  Superintendent  or 
Examiner  who  shall  knowingly  and  wilfully  render  a  false  ac- 
count of  expenses  paid  by  him  in  the  discharge  of  his  duties,  shall 
be  guilty  of  a  misdemeanor. 

This   is   doubtless   covered  by   the   preceding   section,   but  it  was 
thought  well  to  cover  false  expense  accounts  in  terms. 

§  198.     SEC.  6.     Loans  or  Gratuities  to  Superintendent  or  Ex- 
aminers. 

No  bank,  nor  any  officer,  director,  or  employee  thereof  shall 
make  any  loan,  or  grant  any  gratuity  to  the  Superintendent  of 
Banks,  the  Assistant  Superintendent  or  any  bank  examiner;  nor 
shall  the  Superintendent  of  Banks,  the  Assistant  Superintendent, 
or  any  Examiner,  accept  any  loan  or  gratuity  of  any  kind  from 
any  bank,  or  from  any  officer,  director  or  employee  thereof,  nor 
accept  any  employment  from,  or  peform  any  service  for  compen- 
sation for,  any  bank,  or  for  any  officer,  director  or  employee 
thereof. 

Any  bank  officer,  director  or  employee  violating  any  of  the 
provisions  of  this  section  shall  be  guilty  of  a  misdemeanor.  Any 
Superintendent  of  Banks,  Assistant  Superintendent  or  Bank  Ex- 
aminer violating  any  of  the  provisions  hereof  shall  be  guilty  of 


BANKING  ACT  OF  1919.  101 

a  misdemeanor  and  shall  forfeit  his  office  and  be  thereafter  dis- 
qualified from  holding  office  in  the  Department  of  Banking  of 
this  State. 

This  section  is  taken  from  the  Federal  Reserve  Act,  as  amended 
by  the  Acts  of  June  21,  1917,  and  September  26,  1918,  §  9833,  U.  S. 
Comp.  Stat. 

§  199.     SEC.  7.     Opening  Bank  Without  Permit. 

Any  person  who  shall  hereafter  transact  any  business  as  an 
officer,  director,  agent,  or  representative  of  any  bank  hereafter  in- 
corporated, before  such  bank  is  authorized  to  transact  business 
as  a  bank  by  the  permit  of  the  Superintendent  of  Banks,  shall 
be  guilty  of  a  misdemeanor. 

This  section  is  taken  from  §  38  of  the  Alabama  law. 

§  200.     SEC.  8.     False  Statement  of  Condition. 

Any  person  who  knowingly  and  wilfully  verifies  by  oath  or 
affirmation  any  false  report  of  the  condition  of  any  bank,  made 
to  the  Superintendent  of  Banks,  on  the  call  of  the  Superintendent 
for  such  report,  or  any  false  report  or  certificate  of  any  other 
matter  or  thing  required  by  this  act  to  be  reported,  shall  be  pun- 
ished by  confinement  and  labor  in  the  penitentiary  for  not  less 
than  one  (1)  year  nor  longer  than  five  (5)  years. 

This  section  follows  §  665  (3)  of  the  New  York  act,  and  §  39  of 
the  Alabama  act. 

§201.     SEC.  9.     False 'Oath. 

Any  person  who  wilfully  and  corruptly  swears  or  affirms 
falsely  when  being  examined  under  oath  by  the  Superintendent 
of  Banks,  or  any  Examiner  appointed  by  him,  in  regard  to  any 
material  matter  or  thing,  shall  be  guilty  of  false  swearing,  and 
upon  conviction  shall  be  punished  by  confinement  and  labor  in  the 
penitentiary  for  not  less  than  one  (1)  year  nor  more  than  five 
(5)  years. 

This  section  follows  §  40  of  the  Alabama  act.  Doubtless  §  261, 
P.  C.,  making  penal  false  swearing  wherever  an  oath  is  lawfully 
administered  would  have  been  sufficient  to  cover  the  cases  provided 
for  by  this  section. 

§  202.     SEC.  10.     False  Entries. 

Any  officer,  agent,  clerk,  or  employee  of  any  bank  who  makes 
any  false  entry  in  any  book,  report,  or  statement  of  the  bank,  or 


102  PARK'S  BANKING  LAW  OF  GEORGIA. 

who  omits  or  concurs  in  omitting  to  make  any  material  entry  in 
its  books  or  accounts  with  intent  in  either  case  to  injure  or  de- 
fraud the  bank,  or  any  other  company,  firm,  or  person,  or  to  de- 
ceive any  officer  of  the  bank,  or  the  Superintendent  of  Banks,  or 
any  Examiner,  and  every  person  who  with  like  intent  aids  or 
abets  any  officer,  director,  clerk,  agent,  or  employee,  in  making 
any  false  entry,  report',  or  statement,  or  omitting  to  make  any 
material  entry  on  its  books  and  accounts,  shall  be  punished  by  im- 
prisonment and  labor  in  the  penitentiary  for  not  less  than  one  (1) 
year  nor  more  than  ten  (10)  years. 

This  section  is  modelled  after  §  5209,  U.  S.  R.  S.;  §  9772,  U.  S. 
Comp.  Stat.  The  Federal  Reserve  Act  extends  the  provisions  of 
§  5209  to  State  banks  on  their  becoming  members  of  the  Federal  Re- 
serve System,  §  9792  U.  S.  Comp.  Stat. 

§  203.     SEC.  11.     Refusing  to  Make  Statements. 

Any  officer,  director,  agent,  clerk,  or  employee  who  refuses,  or 
wilfully  and  intentionally  neglects  to  make  any  report  or  state- 
ment of  or  concerning  the  bank  of  which  he  is  such  officer,  di- 
rector, clerk,  or  employee,  where  such  report  or  statement  is 
called  for  by  the  Superintendent  of  Banks,  shall  be  guilty  of  a 
misdemeanor. 

This  follows  §  46  of  the  Alabama  law. 

§  204.     SEC.  12.    Bank  Officers  Violating  the  Charter. 

Any  president,  director,  or  other  officer  of  any  bank  who  shall 
violate  or  be  concerned  in  violating  any  provision  of  the  charter 
of  said  bank,  shafl  be  punished  by  imprisonment  and  labor  in  the 
penitentiary  for  not  less  than  one  (1)  year  nor  longer  than  five 
(5)  years. 

This  reenacts  §  202,  Penal  Code,  which  with  the  following  section 
were  contained  in  the  Penal  Code  of  1833  (Cobb's  Digest  797)  and 
have  been  brought  forward  in  each  succeeding  Penal  Code. 

§  205.     SEC.  13.     Presumption  Against  Such  Officers. 

Every  president,  director  or  other  officer  of  any  chartered  bank 
in  this  State  shall  be  deemed  to  possess  such  a  knowledge  of  the 
affairs  of  the  banks  as  to  enable  him  to  determine  whether  any 
act,  proceeding,  or  omission  is  a  violation  of  the  charter.  And 
every  president  and  director,  who  shall  be  present  at  a  meeting 
when  such  violation  shall  occur,  shall  be  deemed  to  have  con- 


BANKING  ACT  OF  1919.  103 

curred  therein,  unless  he  shall  at  the  time  cause,  or  in  writing  re- 
quire, his  dissent  therefrom  to  be  entered  at  large  on  the  minutes 
of  the  board.  And  every  president  and  director  not  present  at 
any  meeting  when  such  violation  shall  take  place,  shall  neverthe- 
less be  deemed  to  have  concurred  therein,  if  the  facts  constituting 
such  violation  appear  on  the  books  of  the  bank,  and  he  remain 
president  or  director  for  three  (3)  months  thereafter,  and  do  not 
within  that  time,  unless  prevented  by  illness  or  other  providential 
cause,  cause  or  in  writing  require,  his  dissent  from  such  illegal 
proceedings  to  be  entered  at  large  on  the  minutes  of  the  board. 

This  reenacts  §  203,  Penal  Code. 

§  206.     Sue.  14.     Falsely  Representing  Capital  Stock. 

Any  officer,  director,  agent,  clerk,  or  employee  who  knowingly 
by  letter-heads,  newspaper  advertisements,  sign,  circulars,  or 
otherwise  represents  capital  stock  of  any  bank  to  be  in  excess 
of  the  capital  actually  paid  in,  or  who  knowingly  makes  or  con- 
curs in  making  or  publishing  any  written  report,  exhibit,  or  state- 
ment of  its  affairs  or  pecuniary  condition,  containing  any  material 
statement  therein  which  is  false,  or  who  knowingly  omits  or  con- 
curs in  omitting  any  statement  required  by  law  to  be  contained 
therein,  shall  be  punished  by  imprisonment  and  labor  in  the  peni- 
tentiary for  not  less  than  one  (1)  year  nor  more  than  five  (5) 
years. 

This  is  taken  from  §  46,  of  the  Alabama  law. 

§  207.     SEC.  15.     Falsely  Advertising  That  Deposits  Are  In- 
sured. 

Any  officer,  director,  agent,  or  employee  of  any  bank  who 
shall  advertise  by  any  office  sign,  or  upon  any  letter-head,  bill- 
head, blank  note,  receipt,  certificate,  circular,  or  on  any  written 
or  printed  paper  that  the  deposits  in  said  bank  are  insured  or  are 
guaranteed,  unless  such  deposits  are  in  fact  insured  or  guaran- 
teed, shall  be  guilty  of  a  misdemeanor. 

The  deposit  guarantee  laws  of  a  few  of  the  States  led  some  of  the 
banks  to  insure  their  deposits.  Some  of  this  insurance  was  of  no 
value,  the  insuring  company  being  without  responsibility.  It  was  to 
prevent  such  fraudulent  insurance  that  this  section  was  framed. 


104  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  208.     SEC.  16.     Concealing  Loans. 

Any  officer,  director,  clerk,  or  other  employee  of  any  bank  who 
intentionally  conceals  from  the  directors  of  such  bank,  or  from 
the  committee  to  whom  the  directors  have  delegated  authority  to 
pass  on  loans  and  discounts,  any  discount  or  loan  made  for  and 
in  behalf  of  said  bank,  or  the  purchase  or  sale  of  any  note,  bill  of 
exchange  or  security,  shall  be  guilty  of  a  misdemeanor. 

This  is  taken  from  §  44  of  the  Alabama  law. 

§  209.     SEC.  17.     Commissions  to  Officers  on  Loans. 

Any  officer,  director,  agent,  teller,  clerk,  or  other  employee  of  any 
bank  who  asks  or  receives,  or  covenants  or  agrees  to  receive,  any 
commission,  emolument,  gratuity,  or  reward,  or  any  promise  of 
any  commission,  emolument,  gratuity,  or  reward,  or  any  money 
or  property  or  thing  of  value,  or  of  personal  advantage,  for  pro- 
curing or  endeavoring  to  procure  for  any  person,  firm,  or  cor- 
poration, any  loan  from,  or  the  purchase  or  discount  of,  any 
paper,  note,  draft,  check,  or  bill  of  exchange,  by  any  such  bank, 
shall  be  guilty  of  a  misdemeanor. 

This  is  taken  from  §  45  of  the  Alabama  law.  The  Federal  Re- 
serve Act  as  amended,  §  9833,  U.  S.  Comp.  Stat.,  contains  a  similar 
provision  applicable  to  officers,  directors  and  employees  of  member 
banks. 

§    210.     SEC.    18.     Misappropriation    by    Officers,    Directors, 
Agents,  or  Employees. 

Any  officer,  director,  agent,  clerk  or  employee  of  any  bank  who 
knowingly  and  with  intent  to  defraud,  receives  or  possesses  him- 
self of  any  of  its  money  or  property,  or  who  with  intent  to  de- 
fraud, omits  to  make  on  its  books  of  account  a  full  and  true  entry 
of  any  money  or  property  of  the  bank  received  or  possessed  by 
him,  or  who  with  such  intent  causes  such  omission,  shall  be  pun- 
ished by  imprisonment  and  labor  in  the  penitentiary  for  not  less 
than  one  (1)  year  nor  more  than  five  (5)  years. 

The  Acts  enumerated  in  this  section  are  included  in  the  section 
providing  a  penalty  for  embezzlement  in  the  National  Bank  Act,  § 
5209,  U..  S.  R.  S. ;  §  9792,  U.  S.  Comp.  Stat.,  which  by  amendment 
has  been  extended  so  as  to  include  all  members  of  the  Federal  Re- 
serve System  See  §  212. 


BANKING  ACT  OF  1919.  105 

§211.     SEC.    19.     Overdrafts   of   Officers,   Agents,   and   Em- 
ployees. 

Any  officer,  agent,  director,  clerk,  teller,  or  other  employee 
of  any  bank  who  wilfully  and  knowingly,  and  without  authority 
from  the  board  of  directors,  overdraws  his  account  with  such 
bank,  and  thereby  obtains  moneys  or  funds  of  any  such  bank, 
shall  be  guilty  of  a  misdemeanor. 

This  section  is  taken  from  §  45  of  the  Alabama  law. 

§  212.     SEC.  20.     Embezzlement. 

Any  officer,  director,  agent,  clerk,  or  employee  of  any  bank 
who  embezzles,  abstracts,  or  wilfully  misapplies,  any  of  the 
moneys,  funds,  securities  or  credits  of  the  bank  or  who  issues  or 
puts  forth  any  certificate  of  deposit,  draws  any  draft  or  bill  of 
exchange,  makes  any  acceptance,  assigns  any  note,  bond,  draft, 
bill  of  exchange,  mortgage,  judgment,  decree  or  execution  or  who 
makes  use  of  the  name  of  the  bank  in  any  manner,  with  intent  in 
either  case  to  injure  or  defraud  the  bank,  or  any  person,  firm,  or 
corporation,  or  to  deceive  any  officer  of  the  bank,  or  the  Super- 
intendent of  Banks,  or  any  Examiner,  or  any  person  who  with 
like  intent  aids  or  abets  any  such  officer,  director,  agent,  clerk, 
or  employee  in  any  violation  of  this  section,  shall  be  punished  by 
imprisonment  and  labor  in  the  penitentiary  for  not  less  than  one 
(1)  year  nor  more  than  ten  (10)  years. 

See  §  210. 

This  section  is  taken  from  §  5209,  U.  S.  R.  S. ;  §  9772,  U.  S. 
Comp.  Stat.  §  186,  Penal  Code,  made  it  a  felony  for  an  officer 
or  employee  to  "embezzle,  steal,  secrete,  or  fraudulently  take  and 
carry  away"  any  money  or  property  of  a  bank  or  other  corporation. 
This  section  is  considerably  broader  and  more  comprehensive,  and 
includes  wilful  misapplication  as  well  as  embezzlement.  By  the 
Act  of  September  26,  1918,  §  5209,  U.  S.  R.  S.,  is  made  applicable  to 
officers,  directors,  agents  and  employees  of  Federal  Reserve  Banks 
and  of  member  banks  as  well  as  to  national  banking  associations. 
§  9792,  U.  S.  Comp.  Stat.  The  language  employed  is  substantially 
taken  from  §  46  of  the  Alabama  act. 

Accessory,  one  may  be,  who  is  not  an  employee  of  corporation. 
118/799  (3)  (45  S.  E.  614). 

Indictment  substantially  in  language  of  section,  sufficient.  10  App. 
21,  23  (72  S.  E.  516).  Indictment  need  not  allege  accused  was  em- 
ployed "in  the  house  of,  or  place  of  business  of  the  corporation"; 
nor  from  whom  accused  received  the  money ;  nor  character  of  false 
and  fraudulent  reports  rendered.  114/25  (1)  (40  S.  E.  13).  In- 
dictment sufficiently  alleges  by  whom  the  property  embezzled  was 
intrusted  to  the  defendant,  when  it  states  that  he  was  president  of 
corporation,  having  the  general  management  of  its  business  and  the 
control  of  its  funds,  and  having  in  his  trust,  custody  and  control 
large  sums  of  money  belonging  to  it,  etc.  76/551  (13). 


106  PARK'S  BANKING  LAW  OF  GEORGIA. 

Intention  to  restore  money  not  prevent  act  from  being  embezzle- 
ment, where  money  of  principal  is  knowingly  used  by  agent  for  his 
own  private  benefit,  and  in  violation  of  duty  to  principal.  11  App. 
427  (1)  (75  S.  E.  512). 

§  213.     SEC.  21.     Borrowing  by  Officers,  Directors,  and  Em- 
ployees. 

Any  officer,  agent,  or  employee  of  any  bank  who  shall  use  or 
borrow  for  himself,  directly  or  indirectly,  or  for  any  firm  or  part- 
nership of  which  he  is  a  member,  any  money  or  other  prop- 
erty belonging  to  any  bank  of  which  he  is  an  officer,  agent,  or  em- 
ployee, without  such  use  or  loan  being  approved  by  a  majority  of 
the  directors  or  by  the  members  of  a  committee  of  the  board  of 
directors  authorized  to  act,  as  provided  by  Article  XIX,  §  11,  of 
this  act,  or  who  shall  in  like  manner  procure  any  such  loan  which 
is  not  secured  in  the  manner  provided  by  Article  XIX,  §  12,  of 
this  act,  shall  be  guilty  of  a  misdemeanor. 

This  reenacts  in  substance  §  210,  Penal  Code,  modifying  it  some- 
what so  as  to  conform  to  the  requirements  of  §§  155  and  156  of  the 
act. 

§  214.     SEC.  22.     Loans  to  Officers,  Directors,  and  Employees. 

Any  officer,  director,  agent,  or  employee  of  any  bank  whc  shall 
lend  to  any  other  officer,  director,  agent,  or  employee,  or  who 
shall  discount  any  note,  draft,  or  other  paper  for  such  officer,  di- 
rector, agent,  or  employee,  directly  or  indirectly  without  such 
loan  or  discount  being  approved  by  a  majority  of  the  directors 
or  by  the  membe'rs  of  the  committee  of  the  board  of  directors 
authorized  to  act  as  provided  in  Article  XIX,  §  11,  of  this  act, 
or  who  shall  make  any  loan  to  any  such  officer,  director,  agent, 
or  employee,  which  is  not  secured  in  the  manner  provided  by 
Article  XIX,  §  12,  of  this  act,  or  who  shall  be  concerned  in 
making  any  such  loan  or  discount,  shall  be  guilty  of  a  misde- 
meanor. 

This  reenacts  in  substance  §  211,  Penal  Code,  modifying  it  to 
conform  to  the  requirements  of  §§  155  and  156  of  the  act. 

§  215.     SEC.  23.     Bank  Officers  Purchasing  Its  Paper  at  Dis- 
count. 

If  any  president,  director,  officer,  or  agent  of  any  bank  shall 
by  himself  or  agent,  or  in  any  other  manner  either  for  himself 
or  for  the  bank,  directly  or  indirectly,  purchase,  or  be  interested 


BANKING  ACT  OF  1919.  107 

in  the  purchase  of  any  note,  bill,  certificate  of  deposit,  check, 
or  other  evidence  of  debt  issued  by  said  bank  for  a  less  sum  than 
shall  appear  then  due  on  the  face  thereof,  he  shall  be  guilty  of  a 
misdemeanor :  Provided,  however,  That  a  bank  may  discount  its 
unmatured  obligations  at  a  rate  not  exceeding  the  legal  rate  of 
discount,  such  obligation  to  be  immediately  cancelled  and  satis- 
fied. 

This  reenacts  §  207,  Penal  Code,  but  adds  the  proviso  at  the  end 
of  the  section. 

§  216.     Sec.  24.     Purchasing  Shares  with  Capital  Stock. 

If  any  officer,  director,  or  agent  of  any  bank  shall  use  or  apply 
any  part  of  the  capital  stock  of  such  bank  to  the  purchase  of 
shares  of  its  own  stock,  unless  such  purchase  shall  be  necessary 
to  prevent  loss  upon  a  debt  previously  contracted  in  good  faith, 
he  shall  be  guilty  of  a  misdemeanor. 

This  is  a  reenactment  in  substance  of  §  209,  Penal  Code,  the  right 
to  purchase  where  necessary  to  prevent  loss  on  a  debt  previously 
contracted  being  inserted  in  the  Code  section. 

§  217.     SEC.  25.     Unearned  Dividends  and  Misuse  of  Capital. 

Any  director  of  any  bank  who  concurs  in  any  vote  or  act  of 
the  directors  of  such  bank,  by  which  it  is  intended  to  declare  a 
dividend,  except  from  the  net  profits  arising  from  the  business 
of  the  bank ;  or  to  divide,  withdraw,  or  in  any  manner  pay  to 
the  stockholders,  or  any  of  them,  any  part  of  the  capital  stock 
of  the  bank,  or  to  purchase  or  reduce  its  capital  stock,  except  in 
pursuance  of  law ;  or  to  discount  and  receive  any  note  or  other 
evidence  of  debt  in  payment  of  any  installment  of  capital  stock 
actually  called  in  and  required  to  be  paid,  with  intent  to  provide 
the  means  of  making  such  payment ;  or  to  receive  or  discount  any 
note  or  other  evidence  of  debt  with  the  intent  of  enabling  any 
stockholder  to  withdraw  any  part  of  the  money  paid  in  by  him 
on  any  stock  held  by  him  in  such  bank ;  or  to  apply  any  portion 
of  the  funds  of  such  bank,  except  as  allowed  by  law,  directly  or 
indirectly;  in  the  purchase  of  shares  of  its  own  stock,  shall  be 
guilty  of  a  misdemeanor. 

See  §  174  and  notes. 

This  section  is  taken  from  §  664,  of  the  New  York  act.  §  42  of 
the  Alabama  act  is  practically  the  same.  The  declaring  of  dividends 
except  from  net  profits,  and  the  distribution  of  capital  as  dividends 
was  made  a  misdemeanor  by  §§  208  and  740,  P.  C. 


108  PARK'S  BANKING  LAW  OF  GEORGIA. 

Books  of  bank  properly  admitted  in  evidence  to  prove  dividends 
illegally  disclosed.  Cabaniss  v.  State,  8  App.  129  (19)  (68  S.  E.  849). 

Conditions  which  made  declaration  of  dividend  illegal,  evidence 
to  show  existence  of,  for  some  time  prior  thereto  is  relevant,  as 
tending  to  establish  condition  of  bank's  affairs  on  day  in  question, 
as  well  as  to  show  opportunities  for  knowledge  of  these  conditions. 
8  App.  129  (10)  (68  S.  E.  849). 

Expert  accountant  may  give  summarized  statement  of  what  books 
show,  where  books  not  accessible.  8  App.  129  (14)  (68  S.  E.  849). 

Indictment  against  president  or  one  of  directors  need  not  set  out 
the  names  of  other  directors  not  indicted,  though  they  may  have 
participated  in  declaration  of  dividend;  offense  of  president  or  di- 
rector is  several  rather  than  joint.  8  App.  129  (2)  (68  S.  E.  849). 

Pendency  of  another  indictment  for  same  offense,  no  ground  for 
plea  in  abatement.  8  App.  129  (5)  (68  S.  E.  849). 

Motives  of  officers  immaterial  if  they  did  those  acts  which  are 
penal  under  this  section.  8  App.  129  (7)  (68  S.  E.  849). 

Solvency  or  insolvency  is  matter  admitting  of  opinion  evidence. 
There  was  no  error  in  allowing  one  witness  to  testify  as  to  correct- 
ness of  list  of  insolvent  papers,  though  he  was  ignorant  of  fact  of 
solvency  or  insolvency  of  papers,  and  in  allowing  another  witness, 
who  could  not  swear  to  correctness  of  list,  to  testify  as  to  solvency  or 
insolvency  of  the  papers.  8  App.  129  (16,  17)  (68  S.  E.  849). 

Knowledge  on  part  of  defendants  as  to  financial  condition  of  cor- 
poration will  be  presumed,  where  evidence  shows  that,  as  officers  in 
actual  charge  of  current  business,  they  had  full  opportunity  to  ac- 
quire such  knowledge;  and  where  it  is  also  shown  that  they  pre- 
pared and  presented  to  directors  a  statement  of  financial  status  of 
corporation,  and  joined  with  directors  in  declaring  dividend,  and  it 
subsequently  appeared  that  this  statement  was  not  true,  jury  was 
authorized  to  infer  that  accused,  with  knowledge  of  true  financial 
condition,  made  and  presented  false  statements  to  deceive  directors 
as  to  true  financial  status.  Mangham  v.  State,  11  App.  440  (4)  (75 
S.  E.  508). 

Net  Earnings :  Dividends  can  be  lawfully  declared  only  out  of  net 
earnings ;  and  the  difference  between  the  present  value  of  all  the 
corporate  assets  and  the  amount  of  all  losses,  expenses,  other 
charges  and  liabilities,  including  capital  stock,  constitutes  net  earn- 
ings for  purpose  of  dividends.  It  follows  that  an  insolvent  corpora- 
tion cannot  have  net  earnings  out  of  which  dividends  can  be  de- 
clared. 11  App.  440  (2)  (75  S.  E.  508). 

§  218.     SEC.  26.     Overissue  of  Capital. 

Any  officer,  agent,  or  director  of  any  bank  who  knowingly  and 
wilfully  issues,  participates  in  issuing,  or  concurs  in  any  vote  of 
the  directors  to  issue  any  increase  of  its  capital  stock  beyond  the 
amount  of  the  capital  thereof  duly  authorized  by  or  in  pursuance 
of  law,  or  who  knowingly  or  wilfully  sells,  or  agrees  to  sell,  or 
who  is  interested,  directly  or  indirectly,  in  the  sale  of  any  such 
shares  of  stock  of  such  bank,  or  in  any  agreement  to  sell  same, 
shall  be  guilty  of  a  misdemeanor. 

This  is  taken  from  §  43  of  the  Alabama  law. 


BANKING  ACT  OF  1919.  109 

§  219.     SEC.  27.     Certifying  Checks. 

Any  officer  of  a  bank  certifying  any  check,  draft,  or  order  in 
violation  of  the  provisions  of  §  37  of  Article  XIX  of  this  act  shall 
be  guilty  of  a  misdemeanor. 

This  reenacts  in  substance  §  623,  P.  C.     See  note  to  §  181. 

§  220.     SEC.  28.     Bank  Insolvency  Deemed  Fraudulent. 

Every  insolvency  of  a  bank  shall  be  deemed  fraudulent,  and  the 
president  and  directors  shall  be  severally  punished  by  imprison- 
ment and  labor  in  the  penitentiary  for  not  less  than  one  (1)  year 
nor  longer  than  ten  (10)  years :  Provided,  That  the  defendant 
in  a  case  arising  under  this  section  may  repel  the  presumption 
of  fraud  by  showing  that  the  affairs  of  the  bank  have  been  fairly 
and  legally  administered,  and  generally  with  the  same  care  and 
diligence  that  agents  receiving  a  commission  for  their  services  are 
required  and  bound  by  law  to  observe;  and  upon  such  showing 
the  jury  shall  acquit  the  prisoner. 

This  is  a  reenactment  of  §  204,  P.  C.,  the  section  first  appearing  in 
the  Penal  Code  of  1833.  See  148/758;  18  App.  403  (7). 

Debt,  punishment  provided  by  this  section  does  not  amount  to  im- 
prisonment for.  7  App.  101  (2),  108  (66  S.  E.  383). 

Indictment  should  charge  that  bank  became  "fraudulently  insol- 
vent." 7  App.  101  (4),  111  (66  S.  E.  383). 

Intentional  fraud  and  dishonesty  of  bank  officials  punishable  under 
this  section,  not  mere  mismanagement  resulting  in  insolvency.  7 
App.  101  (2),  108  (66  S.  E.  383). 

Presumption  that  bank's  insolvency  due  to  fraudulent  acts  of  its 
officials  could  be  legalized  as  evidence  by  legislature.  7  App.  101  (3), 
110  (66  S.  E.  383)  ;  and  see  124/15  (5)  (52  S.  E.  74)  ;  128/668  (5) 
(57  S.  E.  889).  Either  insolvency  or  failure  to  redeem  bills  raises 
presumption  that  crime  committed  in  mismanagement  of  bank.  7 
App.  101  (1)  (66  S.  E.  383). 

§  221.     SEC.  29.     Receiving  Deposits  After  Insolvency. 

When  money  is  deposited  on  general  deposit  with  any  bank  in 
this  State,  or  with  any  company  or  individual  doing  a  banking 
business  in  this  State,  and  such  bank,  or  company,  or  individual  is 
insolvent  at  the  time,  a»d  such  insolvency  is  known  to  the  officers 
having  charge  or  control  of  such  bank,  or  company,  or  to  such 
individual,  and  loss  or  injury  shall  result  to  such  depositor,  then 
such  individual  or  such  officers  having  charge  or  control  of  such 
bank  or  company  who,  with  the  knowledge  aforesaid,  so  received 
such  deposits,  shall  be  punished  by  imprisonment  in  the  peniten- 
tiary for  not  less  than  one  (1)  year  nor  more  than  ten  (10)  years. 


110  PARK'S  BANKING  LAW  of  GEORGIA. 

This  reenacts  §  205,  Penal  Code,  with  this  change,  §  205  made  the 
officer  or  individual  banker  liable  where  the  bank  or  individual 
"shall  fail  to  pay  the  depositor  or  person  entitled  thereto  within 
three  days  after  the  demand  therefor,  the  said  deposit  or  deposits," 
while  this  section  makes  the  officer  or  individual  liable  where  "loss 
or  injury  shall  result  to  such  depositor,"  no  demand  being  neces- 
sary. 

Alabama  has  a  similar  provision,  §  41,  Alabama  act. 

§  222.     SEC.  30.     Certain  Transfers,  etc.,  of  Stock,  etc.,  Fraud- 
ulent. 

The  president,  directors  or  officers  of  a  bank,  or  any  of  them, 
who  shall  make,  or  consent  to  the  making  of  any  conveyance,  as- 
signment, transfer,  mortgage,  or  lien,  with  intent  to  hinder,  delay, 
or  defraud  creditors,  after  insolvency,  or  in  contemplation 
thereof,  whether  the  same  be  made  to  an  innocent  purchaser  or 
to  any  other  person  shall  severally  be  guilty  of  a  misdemeanor. 

This  reenacts  in  substance  §  206,  P.  C. 

§  223.     SEC.  31.     Penalty  for  Failing  to  Comply  with  Act. 

Any  officer,  employee,  director  or  agent  of  any  bank  or  any 
other  person  whether  connected  with  said  bank  or  not,  who  shall 
wilfully  violate  any  of  the  provisions  of  this  act  shall,  unless 
otherwise  provided  in  the  act,  be  guilty  of  a  misdemeanor. 

This  is  a  general  section  intended  to  cover  all  cases  not  specially 
provided  for  and  in  terms  covered. 

§  224.     SEC.  32.     Libel  of  Bank. 

Any  person  who  shall  publish  or  cause  to  be  published  any  false 
statement,  expressed  either  by  printing  or  writing,  or  signs,  pic- 
tures, or  like,  of  or  concerning  any  bank,  as  to  the  assets  or  lia- 
bilities of  said  bank,  or  as  to  its  solvency  or  ability  to  meet  its 
obligations,  or  as  to  its  soundness,  or  who  shall  publish  or  cause 
to  be  published  any  other  false  statement  so  expressed,  calculated 
to  affect  the  credit  or  standing  of  said  bank,  or  to  cast  suspicion 
upon  its  solvency,  soundness,  or  ability  to  meet  its  deposits  or 
other  obligations,  in  due  course,  shall  be  guilty  of  a  misdemeanor. 

This  and  §  225  are  designed  to  meet  an  evil  to  which  banks  are 
peculiarly  subject  and  for  which  heretofore  there  has  been  no  ade- 
quate redress.  The  language  follows  substantially  that  of  §  340, 
P.  C.,  denning  criminal  libel. 

Statutes  punishing  derogatory  statements  affecting  banks  have 
been  passed  in  twenty-three  States. 


BANKING  ACT  OF  1919.  Ill 

§  225.     SEC.  33.     Slander  of  Bank. 

Any  person  who  shall  falsely  circulate  any  report,  or  make 
any  false  oral  statement  as  to  the  assets  or  liabilities  of  a  bank, 
or  as  to  its  solvency  or  ability  to  meet  its  obligations,  or  as  to  its 
soundness;  or  who  shall  make  any  other  false  oral  statement 
calculated  to  affect  the  credit  or  standing  of  said  bank,  or  to  cast 
suspicion  upon  its  solvency,  soundness,  or  ability  to  meet  its  de- 
posits, or  other  obligations  in  due  course,  shall  be  guilty  of  a  mis- 
demeanor. 

See  notes  to  §  224. 

§  226.     SEC.  34.     Check  or  Draft  Without  Funds. 

Any  person  who,  with  intent  to  defraud,  shall  make,  or  draw, 
or  utter,  or  deliver  any  check,  draft,  or  order  for  the  payment 
of  money  upon  any  bank,  or  other  depository,  knowing  at  the 
time  of  such  making,  drawing,  uttering  or  delivery  that  the  maker 
or  drawer  has  not  sufficient  funds  in  or  credit  with  such  bank, 
or  other  depository,  for  the  payment  of  such  check,  draft  or  order 
in  full  upon  its  presentation,  shall  be  guilty  of  a  misdemeanor. 
The  making,  drawing,  uttering  or  delivering  of  such  check,  draft 
or  order  as  aforesaid,  shall  be  prima  facie  evidence  of  intent  to 
defraud.  The  word  "credit"  as  used  herein  shall  be  construed  to 
mean  an  arrangement  or  understanding  with  the  bank  or  deposi- 
tory for  the  payment  of  such  check,  draft  or  order. 

This  section  is  in  the  form  recommended  by  the  American  Bank- 
ers' Association.  It  supersedes  the  Act  of  1914,  §  718  (d),  P.  C. 
That  Act  made  the  procuring  of  money  or  other  thing  of  value  upon 
a  worthless  check  a  misdemeanor  provided  the  check  was  not  made 
good  in  thirty  days.  Under  this  section  the  giving  of  the  check 
"with  intent  to  defraud"  constitutes  the  offense,  whether  the  person 
issuing  or  uttering  the  check  obtains  value  therefore  or  not,  and 
having  committed  the  crime  by  the  fraudulent  issuing  of  the  check 
the  utterer  is  no  longer  allowed  to  compound  it  by  making  it  good 
in  thirty  days,  as  he  could  do  under  the  former  statute.  Thirty- 
eight  States  have  enacted  statutes  in  one  form  or  another  for  the 
punishment  of  the  crime  of  passing  worthless  checks. 

§  227.     SEC.  35.     Private  Banker  Using  Unauthorized  Name, 
Signs,  etc. 

Any  private  person  or  the  members,  of  any  firm  or  voluntary 
association  engaged  in  the  business  of  banking  who  shall  violate 
the  provisions  of  section  four  (4),  Article  I,  of  this  act,  shall  be 
guilty  of  a  misdemeanor;  Provided,  however,  That  the  pro- 
visions of  this  section  shall  not  become  operative  until  the  ex- 


112  PARK'S  BANKING  LAW  OF  GEORGIA. 

piration  of  twelve  (12)  months  from  and  after  the  time  when  this 
act  shall  go  into  effect. 

A  similar  provision  is  found  in  §  141  of  the  New  York  law. 

§  228.     SEC.  36.     Stockholder  Failing  to  Give  Notice  of  As- 
sessment to  Pledgee. 

Should  any  stockhelder  fail  to  give  to  any  person,  firm,  or 
corporation  to  whom  he  shall  have  pledged  or  hypothecated  any 
stock  in  any  bank  notice  of  any  assessment  levied  thereon  to 
make  good  the  capital  stock  of  any  bank  which  may  have  become 
impaired,  of  which  he.  has  received  notice  and  which  assessment 
he  shall  fail  or  refuse  to  pay  for  any  reason,  by  registered  mail 
at  least  five  (5)  days  before  the  expiration  of  the  time  within 
which  such  assessment  may  be  paid,  giving  to  such  creditor  the 
right  to  pay  the  same  should  he  so  desire,  he  shall  be  guilty  of  a 
misdemeanor.  Proof  by  the  person  to  be  notified  that  no  such 
notice  has  been  received  shall  be  prima  facie  evidence  that  such 
notice  was  not  given. 

This  section  affords  a  necessary  protection  to  the  pledgees  or 
holders  of  bank  stock  as  collateral  in  view  of  the  provision  of  §  50 
of  the  act  authorizing  the  sale  of  stock  to  make  good  impairment 
of  capital  and  the  cancellation  of  the  outstanding  certificate. 

§  229.     SEC.  37.     Criminal  Violations  to  Be  Submitted  to  the 
Grand  Juries. 

The  Superintendent  of  Banks  shall  have  the  right  to  submit 
to  the  grand  juries  of  the  respective  counties  of  the  State  any 
criminal  violations  of  the  banking  laws  known  by  him  to  have 
occurred  in  such  counties.  But  this  provision  shall  not  be  so  con- 
strued as  to  prevent  the  Superintendent  or  other  persons  from 
proceeding  in  such  cases  by  affidavit  and  warrant. 

A  similar  provision  is  made  by  §  47  of  the  Alabama  law. 

§  230.     SEC.  38.    Misdemeanors,  How  Punished. 

Upon  conviction  of  a  misdemeanor,  as  prescribed  by  the  sev- 
eral provisions  of  this  act,  the  offender  shall  be  punished  as  pre- 
scribed by  §  1065  of  the  Penal  Code  of  Georgia. 

§  1065,  P.  C.,  is  as  follows  : 

"Except  where  otherwise  provided,  every  crime  declared  to  be  a 
misdemeanor  is  punishable  by  a  fine  not  to  exceed  one  thousand  dol- 
lars, imprisonment  not  to  exceed  six  months,  to  work  in  the  chain 


BANKING  ACT  OF  1919.  113 

gang  on  the  public  roads  or  on  such  other  public  works  as  the  county 
or  State  authorities  may  employ  the  chain  gang,  not  to  exceed  twelve 
months,  any  one  or  more  of  these  punishments  in  the  discretion  of 
the  judge:  Provided,  That  nothing  herein  contained  shall  authorize 
the  giving  the  control  of  convicts  to  private  persons,  or  their  em- 
ployment by  the  county  or  State  authorities  in  such  mechanical  pur- 
suits as  will  bring  the  products  of  their  labor  into  competition  with 
the  products  bf  free  labor.  If  the  convict  be  a  female,  the  judge 
may,  in  his  discretion,  sentence  her  to  labor  and  confinement  in  the 
woman's  prison  on  the  State  farm,  in  lieu  of  a  chain  gang  sentence, 
not  to  exceed  twelve  months:  Provided,  That  the  trial  judge  shall 
have  the  discretion  also  of  sending  any  person  convicted  of  a  mis- 
demeanor to  the  State  farm." 


ARTICLE  XXI. 

Act  to  Take  Effect,  When. 

§  231.     SUCTION  1.     Act,  When  to  Take  Effect. 

This  act  shall  take  effect  from  and  after  the  1st  day  of  Janu- 
ary, 1920,  and  shall  then  supersede  all  existing  laws  regulating 
banks  and  banking  in  this  State.  On  said  date,  or  as  soon  there- 
after as  the  Superintendent  of  Banks  shall  be  appointed  and 
qualified,  the  State  Treasurer  shall  turn  over  and  deliver  to  the 
Superintendent  of  Banks  all  moneys  in  his  hands  as  ex-officio 
State  Bank  Examiner  and  all  records,  books,  papers,  property, 
and  effects  belonging  to  the  Bank  Bureau  as  now  organized  and 
conducted  in  the  State  Treasury.  The  receipt  of  the  Superin- 
tendent of  Banks  shall  be  a  full  acquittance  to  the  State  Treas- 
urer for  all  funds,  records  and  property  so  turned  over  and  de- 
livered. 

The  act  is  intended  to  furnish  a  complete  banking  code,  supersed- 
ing all  existing  laws  on  the  subject. 


ARTICLE  XXII. 

Conflicting  Laws  Repealed. 

§  232.     SECTION  1.     General  Repealing  Clause. 

All  laws  and  parts  of  laws  in  conflict  with  this  act,  are  hereby 
repealed. 


114  PARK'S  BANKING  LAW  OF  GEORGIA. 

TRUST  COMPANIES. 

(Acts  1898,  p.  78,  as  amended,  §§  2815-2821  (e),  Park's  Ann.  Code.) 
Section  i.     Their  Incorporation. 

§  233.     (§  2815.)     How  Incorporated. 

Any  number  of  persons,  not  less  than  five,  may  associate  them- 
selves together  for  the  purpose  of  organizing  a  trust  company 
in  accordance  with  the  provisions  of  this  act.  The  persons  so 
desiring  to  become  incorporated  shall  file  in  the  office  of  the 
Secretary  of  State  a  declaration  in  writing,  signed  by  each  of 
them,  stating  their  names,  and  residences,  the  name  and  style 
of  the  proposed  corporation,  the  location  of  the  principal  business 
thereof,  the  amount  of  the  capital  stock,  and  such  other  matters 
as  they  may  deem  it  desirable  to  state.  Such  declaration  must  be 
accompanied  by  the  affidavit  of  at  least  three  of  the  subscribers 
that  at  least  twenty-five  thousand  dollars  ($25,000.00)  of  the 
capital  stock  subscribed  has  been  actually  paid  in  by  the  sub- 
scribers and  that  the  same  is  in  fact  held  and  is  to  be  used  solely 
for  the  business  or  purposes  of  the  corporation.  A  fee  of  fifty 
($50.00)  dollars  shall  be  paid,  on  filing  the  application  into  the 
treasury,  and  the  Secretary  of  State  shall  not  issue  any  charter 
before  its  payment. 

Acts  1898,  p.  78. 

Constitutional,  this  act  declared  to  be;  it  does  not  violate  pro- 
visions of  the  Constitution  embraced  in  §  6446.  120/1080  (4)  (48 
S.  E.  437). 

§  234.     (§  2816.)     Notice;    Certificate  of  Incorporation. 

Previous  to  filing  the  declaration,  as  provided  in  the  preceding 
section  hereof,  a  notice  of  intention  to  organize  such  trust  com- 
pany shall  be  published  at  least  once  a  week  for  four  weeks  in 
a  newspaper  of  general  circulation  published  in  the  city  in  which 
the  principal  office  of  the  proposed  corporation  will  be  located, 
which  notice  shall  specify  the  names  of  the  proposed  corporators, 
name  of  the  proposed  trust  company  and  the  location  of  the  same. 

When  such  declaration  shall  have  been  filed  and  notice  of  in- 
tention shall  have  been  published  as  herein  provided,  the  Secre- 
tary of  State  shall  issue  to  the  subscribers,  their  associates,  and 
successors,  a  certificate  of  incorporation  under  the  seal  of  the 


TRUST  COMPANY  ACT.  115 

State,  certifying  that  the  subscribers,  their  associates  and  suc- 
cessors, are  a  body  politic  and  corporate  under  the  name  and 
style  designated  in  the  declaration,  and  that  such  corporation  has 
the  capacity  and  powers  conferred  and  is  subject  to  all  the  duties 
and  liabilities  imposed  by  law.  The  Secretary  of  State  shall 
record  the  declaration,  affidavit  and  certificate  of  incorporation. 

Acts  of  1898,  p.  78. 

Section  2.     Their  Powers. 

§  235.     (§  2817.)     Corporate  Powers. 

All  trust  companies  organized  under  this  act  are  declared  to 
be  corporations  possessed  of  the  powers  and  functions  of  cor- 
porations generally,  and  as  such  have  power : 

1.  To  make  contracts. 

2.  To  sue  and  be  sued,  complain  and  defend,  in  any  court,  as 
fully  as  natural  persons. 

3.  Fiscal  Agent.     To  act  as  the  fiscal  or  transfer  agent  of  any 
state,    municipality,   body   politic   or   corporation,    and    in    such 
capacity  to  receive  and  disburse  money,  and  transfer,  register  and 
countersign  certificates  of  stock,  bonds,  and  other  evidence  of  in- 
debtedness. 

4.  Deposits  and  Loans.    To  receive  deposits  of  trust  moneys, 
securities  and  other  personal  property  from  any  person  or  cor- 
poration, and  to  loan  money  on  real  estate  or  personal  securities. 

5.  Buy  and  Sell  Real  Estate.     To  lease,  purchase,  hold  and 
convey  any  and  all  real  estate  necessary  in  the  transaction  of 
its  business,  or  which  the  purposes -of  the  corporation  may  re- 
quire, or  which  it  shall  acquire  in  satisfaction  or  partial  satisfac- 
tion of  debts  due  the  corporation,  under  sales,  judgments  or  mort- 
gages or  in  settlement  or  partial  settlement  of  debts  due  the  cor- 
poration by  any  of  its  debtors. 

6.  Trustee  Under  Mortgages  and  Bonds.     To  act  as  trustee 
under  any  mortgage  or  bond  issued  by  any  government,  state, 
municipality,  body  politic  or  corporation,  and  accept  and  execute 
any  other  municipal  or  corporate  trust  not  inconsistent  with  the 
laws  of  this  State. 

7.  Trusts  for  Married  Women.     To  accept  trusts  from  and 
execute  trusts  for  married  women  in  respect  to  their  separate 
property,  whether  real  or  personal,  and  to  be  their  agent  in  the 


116  PARK'S  BANKING  LAW  OF  GEORGIA. 

management  of  such  property,  or  to  transact  any  business  in  rela- 
tion thereto. 

8.  Guardian,  etc.,  of  Minors.     To  act  under  the  order  or  ap- 
pointment of  any  court  of  record  as  guardian,  receiver,  or  trus- 
tee of  the  estate  of  any  minor,  the  annual  income  of  which  shall 
not  be  less  than  one  hundred  dollars  and  as  depository  of  any 
moneys  paid  into  court,  whether  for  the  benefit  of  any  such  minor, 
or  any  other  person,  corporation,  or  party. 

9.  Management  of  Estate  Property.    To  take,  accept  and  exe- 
cute any  and  all  such  legal  trusts,  duties,  and  powers  in  regard 
to  the  holding,  management  and  disposition  of  any  estate  and 
property,  real  or  personal,  and  the  rents  and  profits  thereof,  or 
the  sale  thereof,  as  may  be  granted  or  confided  to  it  by  the  Su- 
perior Court,  or  by  any  other  court  of  record,  or  by  any  person, 
corporation,  municipality  or  other  authority,  and  the  said  corpora- 
tion shall  be  accountable  to  all  parties  in  interest  for  the  faithful 
discharge  of  every  such  trust,  duty,  or  power  which  it  may  so 
accept. 

10.  Trustees  Under  Appointment  of  Persons  or  of  Courts. 
To  take,  accept  and  execute  any  and  all  such  trusts  and  powers 
of  whatever  nature  or  description,  as  may  be  conferred  upon  or 
intrusted  or  committed  to  said  company  by  any  person  or  persons, 
or  any  body  politic,  corporation,  or  other  authority,  by  grant,  as- 
signment, transfer,  devise,  bequest,  or  otherwise  or  which  may 
be  intrusted  or  committed  or  transferred  to  or  invested  in  said 
company  by  order  of  the  Superior  Court  or  any  other  court  of 
record  or  any  ordinary,  and  to  receive  and  take  and  hold  any 
property  or  estate,  real  or  personal,  which  may  be  the  subject 
of  any  such  trust. 

11.  May  Deal  in  Stocks,  etc.    To  purchase,  invest  in  and  sell 
stocks,  bills  of  exchange,  bonds  and  mortgages,  and  other  securi- 
ties ;  and  when  moneys  or  securities  for  moneys  are  borrowed  or 
received  on  deposit  or  for  investment,  the  bonds  or  obligations 
of  the  company  may  be  given  therefor,  but  nothing  herein  con- 
tained shall  be  construed  as  giving  the  right  to  issue  bills  to  cir- 
culate as  money. 

12.  May  Act  as  Executor  or  Administrator,  and  as  Committee 
of  Lunatics,  etc.     To  be  appointed  and  accept  the  appointment 
of  executor  or  of  trustee  under  the  last  will  and  testament,  or 
administrator  with  or  without  the  will  annexed,  of  the  estate  of 
any  deceased  person,  and  to  be  appointed  and  to  act  as  the  corn- 


TRUST  COMPANY  ACT.  117 

mittee  of  the  estates  of  lunatics,  idiots,  persons  of  unsound  mind 
and  habitual  drunkards. 

Acts  of  1898,  p.  78. 

Administrator,  ordinary  may  appoint  trust  company  as.    120/1080 
(4)    (48  S.  E.  437). 

13.  May  Guarantee  Loans.    To  engage  in  the  business  of  guar- 
anteeing the  payment  of  bonds  and  notes  secured  by  mortgage  or 
deed  to  real  estate  within  the  State  of  Georgia:   Provided,  That 
every  such  company  must,  before  it  may  issue  any  such  guarantee, 
set  apart  an  amount  of  not  less  than  $50,000  in  any  case,  as  a 
guaranty  fund,  which  said  guaranty  fund  shall  be  maintained  un- 
impaired so  long  as  any  guaranty  is  outstanding. 

Acts  1917,  p.  56. 

14.  May  Guarantee  Titles.    To  engage  in  the  business  of  certify- 
ing to  the  ownership  of  title  to  real  property  or  furnishing  infor- 
mation relative  thereto,  or  of  guaranteeing  such  titles  or  of  guar- 
anteeing  owners   of    real   property   or   other   persons   interested 
therein  against  loss  by  reason  of  defective  titles  or  incumbrances 
thereon  or  adverse  claim  of  title  :  Provided,  That  every  such  com- 
pany must,  before  it  may  issue  any  title  guarantee  policy  or  guar- 
anteed certificate  of  title,  set  apart  an  amount  not  less  than  one- 
third  of  its  capital  and  surplus,  and  not  less  than  $50,000  in  any 
case,  as  a  guaranty  fund,  which  said  guaranty  fund  shall  be  main- 
tained unimpaired  so  long  as  any  title  guarantee  policies  or  guar- 
anteed certificates  of  titles  are  outstanding. 


No  trust  company  organized  under  the  provisions  of  this  act 


Acts  1917.  p.  56. 

trust  company 

shall  exercise  any  of  the  rights  and  powers  conferred  until  at  least        ^  ^ 
one  hundred  thousand  dollars  of  the  capital  stock  shall  have  been        8.  c 
subscribed  and  paid  in;   nor  shall  any  such  company  receive  de- 
posits subject  to  check  on  demand  or  discount  commercial  paper 
unless  and  until  such  company  shall  have  complied  with  the  laws       * 
of  this  State  regulating  the  incorporation  of  banks;    but  such        * 
company  may  acquire  and  exercise  all  the  rights  and  privileges, 
and  be  subject  to  the  same  liabilities  and  restrictions  as  apply  to 
banks,  upon  compliance  with  the  laws  of  this  State  providing  for 

the  incorporation  and  regulating  the  business  of  banks. 

O 

Acts  1898,  p.  78. 


118  PARK'S  BANKING  LAW  OF  GEORGIA. 

Every  such  company  exercising  the  powers  granted  by  para- 
graph 13,  or  those  granted  by  paragraph  14,  aforesaid,  may  invest 
the  guaranty  fund  therein  provided  for  in  legally  issued  bonds  or 
securities  of  the  United  States,  or  of  any  State  thereof,  not  esti- 
mated above  their  current  market  value;  or  in  legally  issued 
bonds,  warrants  or  securities  of  any  county,  incorporated  city,  or 
town,  or  school  district  in  this  State,  not  estimated  above  their 
par  value,  or  their  current  market  value,  or  in  lawful  bonds  and 
notes  secured  by  mortgage  or  deed  creating  first  lien  on  real 
estate  within  this  State,  and  where  buildings  constitute  a  material 
part  of  the  value  of  the  mortgage  premises  they  shall  be  kept  in- 
sured against  loss  or  damage  by  fire ;  such  guaranty  fund  and  the 
securities  evidencing  the  same  from  time  to  time  shall  be  de- 
posited with  the  State  Treasurer  or  with  some  trust  company  or 
one  of  the  State  depositories  selected  by  the  company  so  deposit- 
ing them  and  approved  by  the  State  Treasurer,  as  custodian,  such 
custodian  giving  proper  receipts  therefor. 

Every  such  company  exercising  the  powers  granted  by  para- 
graph 13  or  those  granted  by  paragraph  14,  aforesaid,  shall  make 
at  least  one  report  each  year,  and  oftener  if  called  upon  by  the 
State  Bank  Examiner,  and  in  the  same  manner  and  subject  to 
the  same  penalties  as  required  of  trust  companies  engaged  in  the 
banking  business. 

Acts  1917,  p.  56. 

Section  3.     Organization  and  Management. 

§  236.     (§  2818.)     Trustees,  Their  Election. 

The  affairs  of  said  company  shall  be  managed  and  its  cor- 
porate powers  exercised  by  a  board  of  trustees  of  such  number, 
not  less  than  five  nor  more  than  twenty-five,  as  shall  from  time  to 
time  be  prescribed  by  its  by-laws.  The  persons  named  in  the 
declaration  of  organization  shall  constitute  the  first  board  of  trus- 
tees of  the  said  company,  and  may  add  to  their  number  not  ex- 
ceeding the  limit  of  fifteen,  and  shall  severally  continue  in  office 
until  others  are  elected  to  fill  their  places.  The  election  of  trus- 
tees shall  be  held  annually  at  the  office  of  the  company,  in  such 
manner  and  at  such  time  as  shall  be  prescribed  in  the  by-laws. 
In  the  case  of  failure  to  elect  on  the  day  named,  the  shareholders 
may  adjourn  to  another  time,  or  in  the  event  of  their  failing  so 


TRUST  COMPANY  ACT.  119 

to  do  the  president  may  call  a  special  meeting  for  the  purpose 
of  electing  trustees,  of  which  special  meeting  ten  days'  notice 
shall  be  given  by  publication  in  at  least  one  newspaper  of  general 
circulation  in  the  city  in  which  such  company  is  located.  The 
vacancies  occurring  in  the  intervals  of  election  shall  be  filled  by 
the  board  of  trustees. 

Act  1898.  p.  78. 

Amended  by  Act  of  1917,  p.  62,  changing  the  word  "fifteen"  in 
the  fourth  line  of  the  section  to  "twenty-five." 

§  237.     (§  2819.)     Powers  of  Trustees. 

The  trustees  shall  have  power  from  time  to  time  to  make  and 
establish  such  by-laws,  rules  and  regulations,  not  inconsistent 
with  the  laws  of  this  State  or  the  United  States,  as  they  shall 
deem  expedient  for  the  conduct  and  management  of  the  business 
affairs  and  property  of  such  company.  The  said  trustees  shall 
elect  one  of  their  number  president  of  the  board,  and  may  elect 
or  appoint  such  other  officer  and  agents  as  they  may  deem  proper, 
and  fix  their  compensation. 

Act  1898,  p.  78. 

§  238.     (§  2820.)     Capital  Stock. 

The  capital  stock  of  the  trust  company  may  be  increased  from 
time  to  time  by  vote  of  two-thirds  of  the  shareholders  at  any 
regular  annual  meeting,  or  special  meeting  called  for  the  purpose, 
to  a  sum  not  exceeding  two  million  ($2,000,000.00)  dollars.  The 
capital  stock  shall  be  divided  into  shares  of  one  hundred 
($100.00)  dollars  each,  which  shares  shall  be  deemed  personal 
property  and  shall  be  transferrable  in  such  manner  as  shall  be 
prescribed  by  the  by-laws  of  the  company. 

Act  1898.  p.  78. 

Section  4.     Other  Corporations  May  Acquire  Like  Powers. 

§  239.     (§  2821.)     How  Other   Corporations   May  Acquire 
Rights. 

Any  savings  bank,  trust,  security  or  guarantee  company  having 
a  paid  in  capital  of  not  less  than  one  hundred  thousand  ($100,- 
000.00)  dollars,  heretofore  incorporated  by  the  General  Assembly 
of  this  State,  with  authority  to  exercise  any  trust  powers,  may  ac- 


120  PARK'S  BANKING  LAW  OF  GEORGIA. 

quire  all  the  rights,  privileges  and  immunities,  with  the  same  re- 
strictions as  are  specified  in  section  three  hereof  in  the  following 
manner:  The  shareholders  at  any  regular  or  special  meeting 
called  for  that  purpose  may,  by  a  vote  of  two-thirds  of  the  stock- 
holders present,  pass  a  resolution  declaring  their  desire  to  ac- 
quire the  right,  privileges  and  immunities,  subject  to  the  restric- 
tions specified  in  section  three  of  this  act,  which  resolution  shall 
be  certified  by  the  president  and  secretary  or  treasurer  of  the 
corporation,  and  filed  with  the  Secretary  of  State.  Whereupon 
the  Secretary  of  State  shall  issue  a  certificate  declaring  that  such 
resolution  having  been  filed,  such  corporation  has  become  vested 
by  law  with  all  the  rights,  powers  and  privileges,  and  subject  to 
the  restrictions  conferred,  defined  and  limited  by  section  three 
of  this  act.  The  corporation  filing  such  resolution  shall  pay  into 
the  treasury  of  the  State  a  fee  of  twenty-five  ($25.00)  dollars, 
and  the  Secretary  of  State  shall  cause  said  resolution  and  his 
certificate  to  be  duly  recorded. 

Act  of  1898,  p.  98. 

Bank,  whether  or  not  charter  of,  gave  authority  to  act  as  trustee 
of  bondholders  secured  by  mortgage,  this  did  not  authorize  decree, 
rendered  in  foreclosure  proceedings,  to  be  treated  as  a  nullity,  at 
instance  of  purchaser  under  sale  by  receivers  appointed  in  such  case. 
136/789  (1)  (72  S.  E.  158). 

§  240.     (§  2821   (a).)     Corporations  Chartered  by  Superior 
Court  May  Acquire  Powers  of  Trust  Companies. 

Any  corporation  heretofore  chartered  by  the  Superior  Courts 
of  this  State  for  the  purpose  of  engaging  in  the  borrowing  and 
lending  of  money,  or  dealing  in  real  estate,  mortgages,  bonds, 
and  other  evidences  of  debt,  or  for  exercising  any  of  the  privi- 
leges granted  to  trust  companies  in  this  Article,  and  which  desires 
to  avail  itself  of  all  of  the  privileges  of  this  Article,  shall  have 
power  to  do  so  by  securing  from  the  Secretary  of  State  an  amend- 
ment to  the  charter  under  which  such  corporation  now  exists, 
which  amendment  shall  confer  upon  it  all  the  privileges  of  this 
Article  applicable  to  trust  companies. 

Acts  1910,  p.  98. 

§241.     (§2821(b).)     Directors  Shall  Authorize. 

Before  such  amendment  can  be  obtained  the  board  of  directors 
of  such  corporation,  at  a  regular  meeting,  shall  by  a  majority  vote, 
authorize  such  amendment  to  the  charter  of  such  corporation. 

Acts  1910,  pp.  98,  99. 


MAY  ACQUIRE;  TRUST  COMPANY  POWERS.  121 

§242.     (§2821(c).)     Capital  Stock. 

No  corporation  shall  avail  itself  of  this  privilege  until  it  has 
actually  subscribed  and  paid  in,  either  in  actual  cash,  or  property 
taken  at  a  fair  valuation,  a  capital  stock  of  at  least  $100,000.00. 

Acts  1910,  pp.  98,  99. 

§  243.     (§  2821  (d).)     When  Provisions  Become  Applicable. 

When  such  amendment  to  the  charter  has  been  obtained,  all 
the  provisions  applicable  to  trust  companies  shall  thereupon  apply 
to  such  corporation. 

Acts  1910,  pp.  98,  99. 

§244.     (§2821(e).)     Fee  for  Amendment. 

The  corporation  filing  its  application  for  such  amendment  shall 
pay  into  the  State  Treasury  a  fee  of  twenty-five  dollars,  and  the 
Secretary  of  State  shall  cause  such  amendment  and  his  certificate 
to  be  duly  recorded.  All  such  amendments  granted  by  the  Sec- 
retary of  State  shall  be  recorded  on  charter  book  in  the  office  of 
the  clerk  of  the  Superior  Court  where  such  original  charter  was 
granted. 

Acts  1910,  pp.  98,  99. 


BANKS  MAY  ACQUIRE  POWERS  OF  TRUST 
COMPANIES. 

(Acts  1917,  p.  81.) 

§  245.     Powers  of  Trust  Companies  May  Be  Acquired. 

Any  banking  company,  heretofore  or  hereafter  incorporated 
under  the  Constitution  and  laws  of  this  State,  having  and  exer- 
cising the  rights,  powers  and  privileges  incident  to  banks,  and 
having  not  less  than  one  hundred  thousand  dollars  ,($100,000.00) 
of  capital  stock  subscribed  and  paid  in,  may  acquire  all  the  rights, 
powers,  privileges  and  immunities,  subject  to  the  liabilities  and 
restrictions  conferred  and  imposed  upon  trust  companies  by  the 
Act  of  the  General  Assembly  of  Georgia  approved  December  23, 
1898  (§  233  et  seq.),  in  the  manner  hereinafter  provided. 


122  PARK'S  BANKING  LAW  of  GEORGIA. 

§  246.     Petition  to  Set  Forth  What. 

Any  such  incorporated  banking  company,  desiring  to  acquire 
the  aforesaid  rights,  powers,  privileges  and  immunities,  shall  file 
with  the  Secretary  of  State  its  petition  setting  forth : 

(a)  The  name  of  such  banking  company,  when  and  by  what 
authority  incorporated  and  its  principal  place  of  business; 

(b)  That  it  has  a  paid-in  capital  of  not  less  than  one  hundred 
thousand  dollars  ($100,000.00)  ; 

(c)  That  a  resolution  has  been  adopted  by  a  majority  vote  of 
its  board  of  directors  expressing  the  desire  that  such  banking 
company  acquire  the  rights,  powers,  privileges  and  immunities, 
subject  to  the  liabilities  and  restrictions,  of  trust  companies  under 
the  aforesaid  act  approved  December  23,  1898. 

And  there  shall  be  attached  to  said  petition  as  exhibitions : 

(1)  The  certificate  of  the  ordinary  of  the  county  in  which  the 
principal  office  of  such  banking  company  is  located  or,  in  the  ab- 
sence or  disability  of  the  ordinary,  the  certificate  of  such  other 
official  as  may  be  authorized  by  law  to  perform  the  duties  of  the 
ordinary,  to  the  effect  that  he  is  satisfied,  after  investigation,  that 
the  petitioning  banking  company  has  a  paid-in  capital  of  not  less 
than  one  hundred  thousand  dollars  ($100,000.00). 

(2)  A  copy  of  the  resolution  of  its  board  of  directors,  express- 
ing the  desire  to  acquire  such  rights  and  privileges,  certified  by 
the  cashier  or  secretary  of  such  banking  company,  under  its  cor- 
porate seal,  to  be  a  true  and  correct  extract  from  the  minutes. 

And  such  petition  shall  be  signed  on  behalf  of  the  banking  com- 
pany by  its  president  or  a  vice-president  and  its  corporate  seal 
shall  be  affixed  thereto,  attested  by  its  secretary  or  an  assistant 
secretary;  and  said  petition  shall  be  verified  by  the  oath  of  the 
president  or  a  vice-president  of  such  banking  company  to  the 
effect  that  the  facts  set  forth  therein  are  true. 

§  247.     Publication  of  Petition. 

After  petition  has  been  filed  with  the  Secretary  of  State  as 
hereinbefore  provided,  a  copy  of  such  petition,  without  the  ex- 
hibits, shall  be  published  once  a  week  for  four  (4)  weeks  in  the 
newspaper  in  which  the  sheriff's  advertisements  are  printed  in 
the  county  in  which  the  principal  office  of  such  banking  company 
is  located,  and,  after  such  publication,  the  petitioning  banking 
company  shall  file  with  the  Secretary  of  State  the  certificate  of 
the  ordinary  of  such  county,  or,  in  his  absence  or  disability,  the 


MAY  ACQUIRE;  TRUST  COMPANY  POWERS.  123 

certificate  of  such  other  official  as  may  be  authorized  by  law  to 
perform  the  duties  of  the  ordinary  to  the  effect  that  a  copy  of 
such  petition  has  been  published  as  herein  required. 

§  248.     Certificate  by  Secretary  of  State. 

When  any  such  banking  company  shall  have  complied  with  the 
foregoing  provisions,  the  Secretary  of  State  shall  issue  to  it  a 
certificate  under  the  seal  of  the  State  declaring  its  charter  to 
be  amended  by  the  acquisition  of,  and  by  having  vested  in  it,  all 
the  rights,  powers,  privileges  and  immunities,  and  subject  to  all 
the  liabilities  and  restrictions  conferred,  defined,  imposed  and 
limited  by  the  Act  of  the  General  Assembly  of  Georgia  approved 
December  23,  1898,  providing  "for  the  incorporation  of  trust 
companies,  to  define  their  rights  and  powers,  and  for  other  pur- 
poses." 

§  249.     Fee  for  Amendment. 

The  banking  company  filing  a  petition  for  an  amendment  to  its 
charter  under  the  provisions  hereof  shall  pay  into  the  treasury 
of  the  State  a  fee  of  twenty-five  dollars  ($25.00),  and  the  Secre- 
tary of  State  shall  cause  such  petition  and  his  certificate  to  be 
duly  recorded. 

§  250.     Directors  to  Act  as  Trustees. 

Any  banking  company,  amending  its  charter  by  the  acquisition 
of  the  powers  of  trust  companies  hereunder,  shall  not  be  regarded 
to  be  managed  and  to  exercise  its  corporate  powers  by  a  board 
of  trustees,  but  the  business  of  such  corporation  shall  continue 
to  be  under  the  management  and  control  of  a  board  of  directors, 
who  shall  possess  all  the  powers,  and  be  subject  to  all  the  duties 
conferred  and  imposed  upon  the  directors  of  banking  companies 
and  upon  the  trustees  of  trust  companies  under  the  laws  of  this 
State. 

This  act  was  not  repealed  by  the  Banking  Act  of  1919.    Opinion 
of  the  Attorney-General,  February  17,  1920. 


124  PARK'S  BANKING  LAW  OF  GEORGIA. 

NATIONAL  BANKS  MAY  EXERCISE  TRUST 

POWERS. 

(Acts  1917.  p.  84.) 

§  251.     Lawful  to  Act  as  Trustee. 

It  shall  be  lawful  for  any  national  bank  located  in  this  State, 
when  empowered  so  to  do  by  the  laws  of  the  United  States,  to 
act  in  this  State  by  any  and  every  method  of  appointment  and  in 
any  capacity  whatever  as  trustee  and  as  executor,  administrator 
or  registrar  of  stocks  and  bonds. 

§  252.     Oath. 

The  oath  prescribed  by  the  laws  of  this  State  to  be  taken  by 
executors  and  administrators  may  be  taken  when  a  national  bank 
acts  in  such  capacity,  either  by  the  president,  or  a  vice-president, 
or  the  cashier,  or  some  trust  officer  designated  for  that  purpose 
by  the  national  bank  proposing  to  so  act.  The  oath  as  trustee,  if 
required,  may  be  taken  in  a  similar  manner. 

§  253.     Bond. 

Nothing  herein  contained  shall  be  considered  to  relieve  a  na- 
tional bank  from  giving  a  bond,  when  such  bond  under  the  laws 
of  this  State  is  required  to  be  given  by  an  individual  acting  in  any 
of  the  aforesaid  capacities. 

The  Federal  Reserve  Act  (December  23,  1913,  §  9794  (k), 
U.  S.  Comp.  Stat.)  authorized  the  Federal  Reserve  Board  to  permit 
national  banks  to  act  as  trustee,  executor,  administrator,  registrar, 
or  in  any  other  fiduciary  capacity  "when  not  in  contravention  of 
State  or  local  law." 


STATE  DEPOSITORIES. 

(Acts  1878-9,  p.  88,  as  amended,  §§  1249-1262,  Park's  Ann.   Code.) 

§  254.     (§  1249.)     State  Depositories  Provided  for  in  Various 
Cities. 

The  GoverfTbr  shall  name  and  appoint  a  solvent  chartered  bank 
of  good  standing  and  credit  in  each  of  the  following  cities  and 
towns,  to  wit:  In  Atlanta,  Athens,  Augusta,  Columbus,  Macon, 


STATE  DEPOSITORY  ACT.  125 

Savannah,  Rome,  Americus,  Albany,  Hawkinsville,  Gainesville, 
Griffin,  LaGrange,  Thomasville,  Newnan,  Cartersville,  Dalton, 
Valdosta,  Milledgeville,  Darien,  Dawson,  Cordele,  Marietta, 
Richland,  Millen,  Warrenton,  Carrollton,  Elberton,  Monticello, 
Fort  Gaines,  Cedartown,  Jackson,  Harmony  Grove,  Thomaston, 
Covington,  Blackshear,  Waycross,  Brunswick,  Forsyth,  Jeffer- 
son, Washington,  Quitman,  Greenville,  Eastman,  Moultrie,  Toc- 
coa,  Statesboro,  Tifton,  Lawrenceville,  Douglas,  Dublin,  Madi- 
son, Tennille,  Sylvania,  McRae,  Cornelia,  Fitzgerald,  Bainbridge, 
Blue  Ridge,  Mt.  Vernon,  Barnesville,  Baxley,  Hartwell,  LaFay- 
ette,  Louisville,  Montezuma,  Pelham,  Sandersville,  Swainsboro, 
Thomson,  Winder,  Calhoun,  Jesup,  Lavonia,  Donaldsonville, 
Claxton,  Ashburn,  Nashville,  Blakely,  Dallas,  Perry,  Fort  Valley, 
Sparta,  Reidsville,  Comer,  Fayetteville,  Ludowici,  Senoia,  Coch- 
ran,  Conyers,  Hazelhurst,  Lyons,  Ocilla,  Talbotton,  Bremen,  But- 
ler, Cairo,  Franklin,  Tallapoosa,  Georgetown,  Gibson,  Jonesboro, 
Jeffersonville,  McDonough,  Ringgold,  Rochelle,  Pembroke,  Chip- 
ley,  Colquitt,  Guyton,  Homerville,  Jasper,  Summerville,  Canton 
Edison,  Gordon,  Alpharetta,  Decatur,  Eatonton,  Fairburn,  Lump- 
kin,  Reynolds,  Rockmart,  Shellman,  Uvalda,  Folkston,  Lincoln- 
ton,  Sylvester,  Temple,  Boston,  Douglasville,  Buford,  Dahlonega, 
Wrightsville,  Camilla,  Ellaville,  Blairsville,  Woodbury,  Spring- 
field, Irwinville,  Manchester,  Kingsland,  Alma,  Metter,  Rebecca, 
Sylvester,  Vidalia,  Gumming,  Vienna,  Adel,  and  Soperton,  [Glen- 
wood,  Greensboro,  Morgan,  Pearson,  and  Willacoochee]  *  which 
shall  be  known  as  State  depositories :  Provided,  That  in  each 
of  said  cities  having  a  population  of  sixty-five  hundred  and  over, 
the  Governor  may  name  and  appoint  not  more  than  two  solvent 
chartered  banks  of  good  standing  and  credit,  which  shall  be  known 
and  designated  as  State  depositories.  [Provided  further,  that  in 
each  of  said  cities  in  the  State  of  Georgia  having  a  population  of 
15,000  and  over,  according  to  the  U.  S.  census  of  1920,  the  Gov- 
ernor may  name  and  appoint  not  more  than  three  solvent  chartered 
bank?  in  good  standing  which  shall  be  known  and  designated  as 
State  depositories.]* 

Constitutional,  Act  of  1879  creating  State  depositories  held  to  be; 
it  did  not  contain  more  than  one  subject  matter  or  matter  different 
from  caption.  66/609  (1). 

State  depositories  are  not  public  officers.    72  Ga.  501. 

*Added  by  Act  of  1920. 


126  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  255.     (§  1249  (a).)     Second  Depository  in  Atlanta. 

Whenever  the  Governor,  from  the  excess  in  the  State  deposi- 
tory heretofore  existing  in  the  city  of  Atlanta,  or  from  the 
amount  of  cash  on  hand  in  the  treasury,  may  deem  it  to  the  best 
interest  of  the  State,  he  is  hereby  authorized  to  name  and  appoint 
a  solvent  chartered  bank  of  good  standing  and  credit  as  an  addi- 
tional depository  in  the  city  of  Atlanta,  subject  to  the  terms  and 
conditions  of  §§  1249  to  1262,  both  inclusive,  of  the  Civil  Code, 
and  the  acts  amendatory  thereof :  Provided,  That  no  deposit 
shall  be  made  with  this  additional  depository  so  long  as  the  first 
depository  in  the  city  of  Atlanta  has  on  hand  belonging  to  the 
State  an  amount  less  than  the  maximum  which  the  law  allows. 

Acts  of  1901,  p.  29. 

§  256.     (§  1249  (b).)     Third  Depository  in  Atlanta. 

Whenever  the  Governor,  from  the  excess  in  the  State  deposi- 
tories heretofore  existing  in  the  city  of  Atlanta,  or  from  the 
amount  of  cash  on  hand  in  the  treasury,  may  deem  it  to  be  the 
best  interests  of  the  State,  he  is  hereby  authorized  to  appoint  in 
said  city  a  solvent  chartered  bank  of  good  standing  and  credit 
as  a  State  depository,  so  as  to  make  three  State  depositories  in 
said  city.  The  said  bank  so  appointed  to  be  subject  to  the  terms 
and  conditions  of  this  chapter,  and  the  acts  amendatory  thereof. 

Acts  1908,  p.  37. 

§  257.     (§  1249  (c).)     Fourth  Depository  in  Atlanta. 

Whenever  the  Governor,  from  the  excess  in  the  State  de- 
positories heretofore  existing  in  the  city  of  Atlanta,  or  from  the 
amount  of  cash  on  hand  in  the  treasury,  may  deem  it  to  the  best 
interests  of  the  State,  he  is  hereby  authorized  to  appoint  in  said 
city  a  solvent  chartered  bank  of  good  standing  and  credit  as  a 
State  depository,  so  as  to  make  four  State  depositories  in  said 
city.  The  said  bank  so  appointed  to  be  subject  to  the  terms  and 
conditions  of  this  chapter  and  the  acts  amendatory  thereof. 

Acts  1911,  p.  58. 

§  258.     (§  1249  (d).)     Fifth  Depository  in  Atlanta. 

Whenever  the  Governor  from  the  excess  in  the  State  de- 
positories heretofore  existing  in  the  city  of  Atlanta,  or  from  the 


STATE  DEPOSITORY  ACT.  127 

amount  of  cash  on  hand  in  the  treasury,  may  deem  it  to  the  best 
interests  of  the  State,  he  is  hereby  authorized  to  appoint  in  said 
city  a  solvent,  chartered  bank  of  good  standing  and  credit  as  a 
State  depository,  so  as  to  make  five  State  depositories  in  said 
city.  The  said  bank  so  appointed  to  be  subject  to  the  terms  and 
conditions  of  this  chapter  and  the  acts  amendatory  thereof. 

Acts  1914,  p.  49. 

§  259.     Sixth  Depository  in  Atlanta. 

Whenever  the  Governor,  from  the  excess  in  the  State  de- 
positories heretofore  existing  in  the  city  of  Atlanta,  or  from 
the  amount  of  cash  on  hand  in  the  treasury,  may  deem  it  to  the 
best  interests  of  the  State,  he  is  hereby  authorized  to  appoint  in 
said  city  a  solvent  chartered  bank  of  good  standing  and  credit, 
as  a  State  depository,  so  as  to  make  six  State  depositories  in  said 
city.  The  said  bank  so  appointed  to  be  subject  to  the  terms  and 
conditions  of  §§  1294  to  1262,  both  inclusive,  of  the  Code  of 
Georgia  of  1910  and  the  acts  amendatory  thereof. 

Acts  1918,  p.  141. 

§  260.     (§  1249  (e).)     Third  Depository  in  Macon. 

Whenever  the  Governor,  from  the  excess  in  the  State  de- 
positories heretofore  existing  in  the  city  of  Macon,  or  from 
the  amount  of  cash  on  hand  in  the  treasury,  may  deem  it  to  the 
best  interests  of  the  State,  he  is  hereby  authorized  to  appoint  in 
said  city  a  solvent  chartered  bank  of  good  standing  and  credit 
as  a  State  depository,  so  as  to  make  three  State  depositories  in 
said  city.  The  said  bank  so  appointed  to  be  subject  to  the  terms 
and  conditions  of  this  chapter  and  the  acts  amendatory  thereof. 

Acts  1912.  p.  49. 

§  261.     Another  Depository  in  Toccoa. 

Section  1249  of  Volume  I  of  the  Code  of  1910,  providing  for 
the  selection  by  the  Governor  of  banks  in  certain  cities  and  towns 
therein  named  as  State  depositories,  and  the  several  acts  amenda- 
tory thereof  be  and  the  same  are  hereby  amended  so  as  to  add 
another  bank  to  the  town  of  Toccoa,  in  the  county  of  Stephens, 
State  of  Georgia,  to  the  list  of  such  cities  and  towns. 

Acts  1916,  p.  35. 


128  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  262.     (§  1250.)   Section  of  State  Depositories,  etc. 

Said  State  depositories  shall  be  appointed  for  the  term  of  four 
years  from  the  date  of  their  appointment,  and  shall  be  liable  to 
be  removed  by  the  Governor,  in  his  discretion,  for  any  neglect 
of  their  official  duty,  and  they  shall  receive  no  salary  or  fees  from 
the  State  of  Georgia. 

Acts  1878-9,  p.  88;    1895,  p.  22 

§  263.     (§  1251.)     Contracts  as  to  Interest  to  Be  Paid. 

The  Governor  shall  make  with  depositories  the  most  advan- 
tageous contracts  for  interest,  to  be  paid  by  them  to  the  State  for 
the  use  of  the  State's  money  which  may  be  deposited  therein,  as 
hereinafter  provided  by  this  chapter.  And  in  the  event  any  de- 
pository so  named  shall  refuse  to  make  satisfactory  contract 
with  the  Governor  as  to  interest  to  be  paid,  he  shall  have  au- 
thority to  remove  such  depository  and  appoint  another.  In  the 
event  only  one  bank  is  situated  in  any  city  designated  as  a  legal 
depository,  the  Governor  can  place  deposits  in  the  depository 
nearest  situated  with  whom  a  satisfactory  contract  has  been 
made :  Provided,  That  no  officer  of  this  State  shall  be  allowed 
to  receive  any  commission,  interest,  or  reward  to  himself  from 
any  source  for  the  depositing  of  such  money  in  such  depositories, 
or  for  continuing  such  deposits.  But  the  receiving  of  any  such 
benefit  by  any  officer  shall  be  a  felony. 

Acts  1878-9,  p.  88;    1895,  p.  22. 

Receiver  of  insolvent  State  depository  liable  to  the  State  for  prin- 
cipal sum  due  and  interest  at  the  contract  rate  to  the  date  of  the  ap- 
pointment of  the  receiver,  and  also  seven  per  cent,  per  annum  as 
legal  interest  from  the  date  of  the  receivership  to  the  date  of  pay- 
ment (one  dissenting).  139/54,  55  (2)  (76  S.  E.  587). 

§  264.     (§  1252.)     Depositories  to  Give  Bond. 

Each  of  said  depositories  shall,  before  entering  upon  the  dis- 
charge of  their  duties  by  their  proper  officers,  execute  a  bond 
with  good  and  sufficient  securities,  to  be  fixed  and  to  be  ap- 
proved by  the  Governor.  Said  bond  shall  be  conditioned  for  the 
faithful  performance  of  all  such  duties  as  shall  be  required  of 
them  by  the  General  Assembly,  or  the  laws  of  this  State,  and  for 
a  faithful  account  of  the  money  or  effects  that  may  come  into 
their  hands  during  their  continuance  in  office.  Said  bond  shall  be 
filed  and  recorded  in  the  executive  office,  and  a  copy  thereof,  cer- 
tified by  one  of  the  Governor's  secretaries,  under  the  seal  of  the 


STATE;  DEPOSITORY  ACT.  129 

executive  department,  shall  be  received  in  evidence  in  lieu  of  the 
original  in  any  of  the  courts  of  this  State.  And  said  bonds,  when 
given,  shall  have  the  same  binding  force  and  effect  as  the  bond 
now  required  by  law  to  be  given  by  State  Treasurers,  and,  in  case 
of  default,  shall  be  enforced  in  like  manner.  In  fixing  the  bond  to 
be  given  by  a  depository  under  this  section,  the  Governor  shall 
so  fix  the  same  as  to  make  it  not  less  than  the  amount  of  money 
intrusted  to  said  depository  and  in  no  case  shall  a  larger  amount 
of  money  be  deposited  in  any  bank  than  the  amount  of  the  bond, 
and  the  Governor  may  at  any  time  require  additional  bond,  if 
necessary,  to  cover  fully  the  amount  deposited  or  intended  to  be 
deposited  in  such  bank. 

Acts  1903.  p.  32;    1878-9,  p.  88. 

Appointment  as  depository,  execution  of  bond  a  short  time  be- 
fore, held  immaterial.  72/502. 

Change  of  officers  and  stockholders  not  affect  corporate  existence. 
If  there  was  impropriety  in  transfer,  Governor  had  no  notice  that 
was  not  equally  accessible  to  surety,  and  surety  not  relieved  on  ac- 
count of  such  change.  72/517  (4). 

Execution  issued  by  Governor  instanter  as  on  treasurer's  bond 
(§  224,  Park's  Ann.  Code).  66/609  (2)  ;  72/511. 

False  representations,  by  Governor,  surety  not  relieved  on  ground 
of,  where  he  lived  in  city  where  bank  located  and  had  opportunity 
to  investigate  condition  of  bank  before  signing  bond.  72/517  (3). 

Forged,  if  name  of  surety  was,  State  had  no  lien  on  her  property 
and  purchaser  of  property  from  her  obtained  good  title.  Whether 
name  of  such  surety  forged,  and  whether  she  ratified  signing  are 
questions  of  fact  for  jury.  72/515.  Forgery  of  signature  of  one 
surety  not  relieve  another  who  entrusted  bond  to  principal  to  obtain 
the  signatures  of  the  other  sureties  and  deliver  the  bond,  thus  en- 
abling it  to  deliver  the  bond  and  to  receive  the  public  funds.  72/ 
518  (7).  See  President. 

Insolvent  at  time  of  selection  and  giving  of  bond,  though  bank 
was,  surety  cannot  relieve  himself  on  ground  that  Governor  selected 
bank  as  solvent  and  published  it  as  one  of  the  depositories  and  that 
surety  was  induced  to  become  such  by  this  fact.  State  takes  bond 
for  its  security  and  does  not  guarantee  bank's  solvency  to  sureties. 
72/517  (1,  2). 

Lien  of  bond  is  same  as  lien  of  treasurer's  bond,  as  provided 
in  §  218,  Park's  Ann.  Code.  It  extends  to  choses  in  action,  dates 
from  execution  of  bond,  and  everybody  is  bound  to  take  notice  of 
it.  66/609  (2)  ;  72/511;  79/159  (1)  (3  S.  E.  646). 

Money  or  effects  received,  sureties  bound  to  see  that  bank  makes 
faithful  account  of,  whether  such  money  or  effects  received  from 
tax  collector  or  treasurer.  72/518  (5). 

President  of  bank,  purchaser  of  property  from,  charged  with 
notice  that  he  was  surety  on  bond.  72/501  (1).  President  having 
executed  bond  as  president  and  signed  it  individually  as  surety 
could  not  be  relieved  from  liability  because  name  of  surety,  which 
he  furnished  and  which  appeared  on  bond  after  his  own  was  signed, 
was  forged ;  and  purchasers  of  property  from  president,  who  were 
charged  with  notice  that  he  was  surety,  could  make  no  defense 
which  he  could  not  make.  Id.,  501  (2). 

Public  officers,  depositories  are  not,  in  sense  of  that  term  as  used 
in  §§  278-302,  inclusive,  Park's  Ann.  Code ;  they  are  instruments 
9 


130  PARK'S  BANKING  LAW  of  GEORGIA. 

or  agencies  sui  generis  and  sui  juris,  standing  on  their  on  law  as 
embodied  in  this  chapter;  principles  ruled  in  66/408,  on  law  above 
cited  relating  to  bonds  of  public  officers,  have  no  application  to 
bonds  of  depositories.  72/501  (3). 

Recording  and  filing,  entry  of,  on  bond  not  required;  recital  by 
Governor  under  seal  of  State  sufficient  evidence  of  such  facts 
unless  overcome  by  proof.  72/502.  Fact  that  bond  was  not  re- 
corded on  minutes  of  executive  office,  but  was  referred  to  in  execu- 
tive orders  there  recorded,  did  not  relieve  surety.  72/518  (6-a). 

Returns  to  Governor  according  to  law,  surety  not  relieved  be- 
cause his  principal  did  not  make,  nor  because  Governor  did  not  re- 
move or  discontinue  the  principal  as  a  depository.  72/518  (6). 

State  entitled  to  priority  of  payment  out  of  assets  of  insolvent 
bank  which  is  State  despository,  as  against  individual  creditors  and 
depositors ;  there  is  nothing  in  law  relating  to  State  depositories 
that  changes  or  modifies  this  right  of  State.  66/609  (4) ;  see 
18/65  (7-9)  ;  101/244  (28  S.  E.  604)  ;  131/750  (2)  (63  S.  E.  502)  ; 
134/163  (1)  (67  S.  E.  803)  ;  139/54,  55  (2-a)  (76  S.  E.  587).  De- 
positors in  insolvent  State  depository  who  are  indebted  to  it  by 
promissory  notes  can  set  off  against  such  notes  the  amounts  justly 
due  them  on  their  deposits.  94/95  (21  S.  E.  146).  Where  funds 
arising  partly  from  oil-inspection  fees,  and  partly  from  private  do- 
nations, were  deposited  in  his  own  name  by  treasurer  of  board  of 
trustees  of  agricultural  and  mechanical  school,  in  a  State  depository 
which  failed,  this  was  not  such  a  debt  due  the  State  as  created  a 
lien  in  its  favor  by  virtue  of  its  general  sovereignty  or  under  the 
law  in  reference  to  State  depositories.  137/537  (73  S.  E.  825). 

Sufficient,  bond  here  was.    72/501  (3),  512. 

§  265.     (§  1253.)     When  Governor  May  Appoint  New  De- 
positories. 

Whenever  from  any  cause  the..  State  depositories  in  any  lo- 
cality shall  cease  to  operate,  it  shall  be  the  duty  of  the  Governor 
to  make  another  appointment,  either  to  fill  out  the  unexpired 
term  or  to  enter  upon  a  new  term  of  four  years,  as  the  case  may 
be.  Said  newly  appointed  depository  shall  have  all  the  powers, 
perform  all  the  duties,  and  be  subject  to  all  the  liabilities  pre- 
scribed for  State  depositories,  and  shall  furnish  a  like  bond  in 
which  each  of  the  sureties  shall  bind  themselves  for  the  entire 
amount  of  the  bond.  In  selecting  any  depository  the  Governor 
shall  not  be  confined  to  banks  chartered  by  the  State,  but  may, 
if  he  deem  it  best,  select  any  bank  chartered  under  the  National 
Bank  Act  of  the  United  States  doing  business  in  this  State. 

Acts  1882-3,  p.  138. 

§  266.     (§  1254.)     Treasurer  to  Advise  Governor  of  Financial 
Condition  of  State  Depositories. 

It  shall  be  the  duty  of  the  Treasurer  to  keep  advised  and  to 
keep  the  Governor  advised,  from  time  to  time,  of  the  financial 
condition  of  the  various  State  depositories,  as  well  as  of  the 


STATS  DEPOSITORY  ACT.  131 

financial  condition  and  standing  of  the  securities  on  the  bonds  of 
such  depositories,  and  if  at  any  time  they  shall  become  satisfied 
of  the  insolvency  of  any  of  the  depositories,  or  that  the  affairs  of 
any  of  said  depositories  are  in  an  embarrassed  condition,  it  shall 
be  the  duty  of  the  Governor  to  direct  the  Treasurer  to  withdraw 
the  money  of  the  State  from  such  depository,  and  the  Governor 
may  declare  the  position  vacant  and  may  proceed  to  appoint  an- 
other bank  in  the  same  locality  to  act  as  such  depository  for  the 
unexpired  term  under  the  rules  and  regulations  prescribed  by  law. 
In  case  the  Governor  should  be  advised  of  the  insolvency  of  the 
securities  on  the  bond  of  any  of  said  depositories,  it  shall  be 
his  duty  to  notify  such  depository  to  strengthen  said  bond,  and 
if  at  the  end  of  ten  days  said  bond  is  not  strengthened,  the  Gov- 
ernor shall  declare  said  office  vacant  and  proceed  to  fill  the  same 
by  new  appointment. 

Acts  1882-3,  p.  138. 

§  267.     (§  1255.)     Sureties,  How  Relieved. 

Any  surety  on  the  bond  of  a  State  depository  desiring  to  be 
relieved  from  said  bond  may  give  notice  in  writing  to  the  Gov- 
ernor of  such  desire,  with  the  reasons  therefor,  and  the  Governor 
shall  have  authority,  in  his  discretion,  to  relieve  such  surety: 
Provided,  The  consent  of  the  cosureties  be  first  obtained  in  writ- 
ing. And  provided  further,  That  the  principal  will  furnish  a  new 
surety  to  take  the  place  of  the  surety  relieved,  and  who  will  as- 
sume all  his  liabilities  for  past  and  future  transactions. 

Acts  1882-3,  p.  138. 

§  268.     (§    1256.)     Amount  of   State's   Deposit   Limited  to 
Amount  of  Bond  of  Depository. 

The  Treasurer  of  this  State  shall  not  deposit  at  any  one  time, 
or  have  on  deposit  at  any  one  time,  in  any  one  of  the  depositories 
of  this  State  for  a  longer  time  than  ten  days,  a  sum  of  money  be- 
longing to  this  State  that  exceeds  the  bond  given  by  said  de- 
pository to  the  State.  The  Treasurer  shall  check  from  any  de- 
pository the  amount  of  the  State's  money  that  said  depository 
holds  in  excess  of  its  bond  and  pay  the  sum  into  the  treasury : 
Provided,  That  a  State  depository  may  be  allowed  to  hold  a  sum 
greater  than  fifty  thousand  dollars,  but  not  in  excess  of  one 
hundred  thousand  dollars,  upon  such  depository  giving  a  new 


132  PARK'S  BANKING  LAW  OF  GEORGIA. 

bond  to  cover  the  maximum  amount  to  be  deposited  with  it,  and 
when  such  new  bond  has  been  executed  and  delivered  to  the  Gov- 
ernor, the  old  bond  shall  be  discharged  and  surrendered;  and 
whenever  a  national  bank  is  selected  as  a  State  depository,  the 
amount  of  the  bond  shall  be  double  the  amount  of  money  to  be 
deposited  with  it.  The  bond  to  be  made  by  the  State  depositories 
may  be  a  personal  bond  or  may  be  made  by  a  deposit  with  the 
State  Treasurer  of  United  States  bonds,  or  Georgia  State  bonds, 
or  either  one  or  both  of  said  methods. 

Acts  1893,  p.  135. 

State  has  prior  lien  for  all  sums  deposited  although  in  excess  of 
the  bond.     101/244  (28  S.  E.  604). 

§  269.     (§  1257.)     Monthly  Statements  of  Depositories. 

Depositories  shall  render  to  both  the  Governor  and  the  Treas- 
urer such  monthly  statements  as  they  now  are  required  by  law  to 
make  to  the  Treasurer. 

Acts  1893,  p.  135. 

§  270.     (§  1258.)     Governor  Authorized  to  Sell  Bonds  of  De- 
faulting Bank. 

Whenever  any  bank  which  has  been  made  a  State  depository 
and  has  deposited  bonds,  shall  fail  to  faithfully  perform  such 
duties  as  shall  be  required  of  them  by  the  General  Assembly  or 
the  laws  of  this  State,  or  shall  fail  to  faithfully  account  for  all  the 
public  moneys  or  effects  that  may  have  come  into  its  hands  during 
its  continuance  in  office,  the  Governor  shall  sell  a  sufficiency  of 
said  bonds  to  reimburse  the  State  the  amounts  due  by  the  State 
depository  on  account  of  such  default. 

Acts  1889,  p.  177. 

§  271.     (§  1259.)   Funds  Subject  to  Check,  etc. 

Said  depositories  shall  hold  all  funds  received  by  them  for  and 
on  account  of  the  State,  subject  to  the  check  or  order  of  the 
State  Treasurer,  and  shall  render  to  the  State  Treasurer,  on  the 
first  day  of  every  month,  a  statement  of  the  money  on  hand  be- 
longing to  the  State,  showing  the  time  when  and  from  whom 
received,  together  with  a  statement  and  balance  sheet  showing 
the  exact  condition  of  its  account  with  the  State  Treasurer  on 
that  day;  and  whenever  any  tax  collector  shall  make  a  deposit 


STATE  DEPOSITORY  ACT.  133 

in  said  depositories  they  shall  give  to  said  tax  collector  a  receipt, 
which  shall  be  a  good  and  sufficient  voucher  to  said  collector,  and 
they  shall  mail  to  the  State  Treasurer  a  duplicate  of  the  receipt 
so  given  to  said  tax  collector,  and  so  soon  as  the  Treasurer  shall 
receive  said  duplicate  receipt  he  shall  issue  his  certificate  in  favor 
of  the  depositing  tax  collector,  and  transmit  the  same  to  the  Comp- 
troller-General, who  shall  pass  the  amount  therein  mentioned  to 
the  credit  of  said  tax  collector,  and  at  once  mail  to  him  a  receipt 
for  said  amount. 

Acts  1878-9,  p.  88. 

§  272.     (§   1260.)     Tax  Collectors  May  Pay  Funds  at  De- 
positories. 

The  Governor  shall,  at  the  time  of  appointing  the  State  deposi- 
tories, make  a  list  of  the  counties  whose  tax  collectors  shall  be  in- 
structed to  pay  State  funds  into  each  depository,  and  said  tax  col- 
lectors shall  pay  into  no  other  depository  than  the  one  named  by 
the  Governor,  and  the  Governor  shall  also  make  known  the  appor- 
tionment of  counties  by  a  proclamation,  duly  published  in  the 
city  where  such  depository  is  located,  giving  the  name  of  the 
depository,  and  the  name  of  the  counties  whose  tax  collectors 
shall  be  instructed  to  pay  into  said  depository  all  moneys  collected 
by  them  for  and  on  account  of  State  taxes. 

Acts  1878-9,  p.  88. 

§  273.     (§  1261.)     Tax  Officers  May  Also  Pay  at  Treasury. 

Nothing  contained  in  this  chapter  shall  be  construed  to  prevent 
tax  collectors  from  paying  State  funds  directly  into  the  State 
treasury.  And  it  shall  not  be  lawful  for  the  State  Treasurer  to 
deposit  such  funds  in  any  bank  or  other  depository  except  those 
established  under  this  chapter,  and  he  shall,  by  check,  or  other 
proper  means,  draw  from,  said  depositories  such  amounts  only, 
and  at  such  times  only,  as  the  necessities  of  his  department  may 
require. 

Acts  1878-9,  p.  88. 

Sureties  bound  for  faithful  account  of  public  money,  whether  re- 
ceived from  tax  collector  or  treasurer.    72/518  (5). 
Treasurer  may  make  other  deposits  than  taxes.    72  Ga.  518. 


134  PARK'S  BANKING  LAW  OF  GEORGIA. 

§  274.     (§  1262.)     Treasurer's  Bond  Not  Affected. 

Nothing  contained  in  this  chapter  shall  be  held,  taken  or  con- 
strued as  affecting,  altering  or  changing  the  provisions  of  existing 
laws  as  to  the  bond  of  the  State  Treasurer. 

Acts  1878-9,  p.  90. 


COUNTY     TREASURERS      MAY     DEPOSIT 
COUNTY  FUNDS  IN  STATE  DE- 
POSITORIES. 

• 

(Acts   1917,  p.  199.) 

§  275.     County  Treasurer  May  Deposit  in  State  Depository. 

The  treasurers  of  the  several  counties  of  this  State  are  hereby 
authorized  to  deposit  in  any  bank  or  banking  institution  which  has 
been  designated  by  law  as  a  depository  for  the  funds  of  the  State 
the  county  funds  which  may  come  into  their  hands  as  county 
treasurers. 

§  276.     Additional  Bond  Required. 

Any  depository  of  the  State  funds  so  selected  by  the  county 
treasurer  to  be  a  depository  of  the  county  funds  shall,  in  addition 
to  the  bond  given  to  the  State  as  security  for  the  money  of  the 
State  deposited  in  said  bank,  give  to  the  county  treasurer  a  bond 
in  an  amount  sufficient  to  protect  him  from  any  loss,  which  bond 
shall  be  payable  to  him,  and  shall  be  conditioned  to  fully  account 
to  him  for  all  county  moneys  that  may  be  deposited  by  him  as 
such  treasurer  under  the  terms  of  this  act. 

§  277.     Interest. 

The  said  county  treasurers  are  hereby  authorized  to  arrange 
with  the  bank  to  pay  interest  on  the  money  so  deposited  with  said 
bank,  but  they  are  not  required  so  to  do,  and  any  money  received 
by  them  as  interest  is  hereby  required  to  be  paid  by  them  into  the 
treasury  of  the  county. 


TAXATION  OF  BANKS.  135 

TAXATION  OF  BANKS. 

(General  Tax  Act  of  1909,  p.  70,  §  991,  Park's  Ann.  Code.) 

§  278.     (§991.)     Banks. 

No  tax  shall  be  assessed  upon  the  capital  of  banks,  or  banking 
associations,  organized  under  the  authority  of  this  State,  or  of 
the  United  States,  located  within  this  State,  but  the  shares  of  the 
stockholders  of  the  banks  or  banking  associations,  whether  resi- 
dent or  nonresident  owners,  shall  be  taxed  in  the  county  where 
the  banks  or  banking  associations  are  located,  and  not  elsewhere, 
at  their  full  market  value,  including  surplus  and  undivided  profits, 
at  the  same  rate  provided  in  this  Article  for  the  taxation  of 
moneyed  capital  in  the  hands  of  private  individuals:  Provided, 
That  nothing  in  this  section  contained  shall  be  construed  to  re- 
lieve such  banks  or  banking  associations  from  the  tax  on  real 
estate  held  or  owned  by  them;  but  they  shall  return  said  real 
estate  at  its  fair  market  value,  in  the  county  where  located.  Pro- 
vided further,  That  where  said  real  estate  is  fully  paid  for,  the 
value  at  which  it  is  returned  for  taxation  may  be  deducted  from 
the  market  value  of  their  shares;  and  if  said  real  estate  is  not 
fully  paid  for,  only  the  value  at  which  the  equity  owned  by  them 
therein  is  returned  for  taxation  shall  be  deducted  from  the 
market  value  of  their  shares. 

The  banks  or  banking  associations  themselves  shall  make  the 
returns  of  the  property  and  the  shares  herein  mentioned,  and  pay 
the  taxes  herein  provided.  Provided  further,  That  all  property 
used  in  conducting  or  operating  a  branch  bank  shall  be  returned 
for  taxation  in  the  county  where  such  branch  bank  may  be  lo- 
cated. The  true  intent  and  meaning  of  this  section  is  that  the 
bank  itself  shall  return  for  taxation  and  pay  the  taxes  on  the  full 
market  value  of  all  shares  of  said  bank  stock. 

The  States  not  being  permitted  to  tax  National  Banks  except  upon 
their  real  estate,  but  being  authorized  to  tax  the  shares  of  stock, 
§  5219,  U.  S.  R.  S.,  the  method  of  taxation  provided  by  this  sec- 
tion was  adopted  to  put  all  chartered  banks,  State  and  national, 
upon  the  same  basis.  With  slight  changes  in  phraseology,  this  sec- 
tion has  appeared  in  each  of  the  General  Tax  Acts  for  many  years. 

"This  statute  (§  5219,  U.  S.  R.  S.)  forbids  assessing  officers  from 
the  valuing  of  some  property  at  a  certain  percentage  of  its  true 
value  in  money,  and  applying  another  percentage  to  other  prop- 
erty and  a  larger  percentage  to  the  shares  of  stock  of  a  bank.  It 
is  immaterial  that  shares  of  bank  stock  are  assessed  on  that  basis 
as  less  than  their  true  value  in  money,  that  rule  being  prescribed 
by  the  State  law."  Pelton  v.  Bank,  101  U.  S.  143;  Cummings  v. 
Bank,  101  U.  S.  153. 


136  PARK'S  BANKING  LAW  OF  GEORGIA. 

POWER  OF  FOREIGN  EXECUTOR,  ADMIN- 
ISTRATOR OR  GUARDIAN. 

(Acts  of  1893,  p.  36,  §  4105,  Park's  Ann.  Code.) 

§  279.    Transfer  of  Stock,  Collection  of  Dividends,  by  For- 
eign Executor,  Administrator  or  Guardian. 

A  foreign  executor  or  administrator  or  foreign  guardian  may 
transfer  the  stock  of  any  bank  or  other  corporation  in  this  State 
standing  in  the  name  of  the  decedent  or  ward,  and  check  for  de- 
posits made  by  him  and  dividends  declared  on  his  stock,  first 
filing  with  the  bank  or  corporation  a  certified  copy  of  his  appoint- 
ment and  qualification :  Provided,  however,  That  no  stock  shall 
be  transferred  until  the  foreign  executor,  administrator,  or 
guardian  shall  have  given  notice  once  a  week  for  four  weeks  in 
the  paper  in  which  the  sheriff's  notices  are  published  in  the  county 
of  the  principal  office  of  the  corporation,  of  his  intention  to  make 
said  transfer. 

This  section  applies  to  executors,  etc.,  holding  appointments  from 
courts  in  other  States  of  the  United  States,  and  possibly  in  the  Ter- 
ritories. 


INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

A. 

ABSTRACTS. 

Trust  company  may  furnish  and  guarantee 236 

ACCEPTANCES. 

By  bank  member  of  Federal  Reserve  System 164 

Foreign  and  domestic 164 

Fraudulently  making,  a  felony 212 

Not  included  in  limit  of  bank's  liability 169 

Power  of  bank  to  issue  and  sell 136 

ACCOUNT,  FALSE  EXPENSE. 

By  Superintendent,  Assistant  or  examiner,  a  misdemeanor 197 

ACCOUNTANTS. 

Superintendent  may  employ,  to  assist  in  liquidating  bank 60 

ACT,  BANKING. 

Repeals  conflicting  laws    232 

Supersedes  all  laws  on  banking  231 

Takes  effect  when 231 

Wilful  violation  of,  a  misdemeanor  223 

ACTION  ON  REPORT. 

Examination  by  directors '. 151 

ADMINISTRATOR  OR   OTHER   FIDUCIARY. 

Deposits  by,  payment  of    186 

Foreign,  may  check  deposits  and  transfer  stock,  etc.,  how 279 

National  Bank  may  act  as  252 

Not  individually  liable  on  stock  138 

Trust  company  may  act  as 236  (12) 

ADVERTISE. 

Falsely,  that  deposits  are  insured,  a  misdemeanor 207 

Private  bank  must,  as  such 4 

AGENT. 

Loans  to  155 ;  156 

Power  of  bank  to  appoint 136 

AGENT,  STOCKHOLDERS. 

Bond  of    76 

Election  of    76 

Powers  and  duties  of   76 

Successor,  how  chosen   77 

137 


138  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

AGENTS  TO  LIQUIDATE  BANK. 

Compensation    of    73 

Superintendent  may  appoint   59 

Bond,  shall  require  of  61 

AGRICULTURAL   OR   INDUSTRIAL   PRODUCTS. 

Loans  secured  by   157 

ALL  CONFLICTING  LAWS  REPEALED   232 

AMENDMENT  OF  CHARTER. 

Allowed    89 

Application   for    90 

Published    91 

Referred  to  Superintendent  92 

Certificate  of,  to  be  issued  and  recorded  95 

Publication  of  application  for  94 

Conferring  trust  company  powers  246 

Examination  and  approval  by  Superintendent   93 

Fee    for    90 

Fees  for  examination   34 

AMENDMENTS  TO  BANKING  LAWS. 

Superintendent  may  suggest   22 

AMOUNT  OF  CAPITAL  STOCK. 

Application  for  charter  must  show  79 

APPLICANTS  FOR  CHARTER. 

Furnish  information  to  Superintendent   82 

APPLICATION  FOR  AMENDMENT  TO  CHARTER. 

Contents  of  90 

Examination  and  approval  by  Superintendent 93 

Publication  of    91 

Reference  to  Superintendent  92 

APPLICATION  FOR  CHARTER. 

Bank    79 

Contents   of    79 

Fee  for 79 

Filed  how    79 

Publication  of    80 

Referred  to  Superintendent  81 

Trust  company 233 

Publication  of  234 

APPLICATION  FOR  RENEWAL  OF  CHARTER. 

Contents  of  98 

Publication  of    99 

Referred  to  Superintendent  100 

APPLICATION  TO  SURRENDER  CHARTER. 

Contents   of    .  123 


INDEX  TO  STATUTES.  139 

[References  Are  to  Sections.] 

APPLICATION  TO  SURRENDER  CHARTER— Continued. 

Filed  how    123 

Publication  of    124 

APPOINTMENT. 

Assistant   Superintendent    

Superintendent    

APPROVAL  OF  SUPERINTENDENT. 

Establish  branch  bank    3 

Voluntary  liquidation  118 

ASSESSMENT  TO  RESTORE  IMPAIRED  CAPITAL. 

Collected  by  suit   50 

Enforced  how    50 

Failure  to  give  pledgee  notice  of,  a  misdemeanor  228 

Made  how   49 

Pledgee  must  be  notified  of  50 

ASSESSMENT   OF  STOCKHOLDERS. 

Additional,  may  be  made   70 

Contest  liability  for,  how   70 

Enforced  by  execution    70 

Repaid  out  of  assets   70 

Superintendent's  estimate,  conclusive  70 

Superintendent  to  make   70 

ASSET  OF  BANK. 

Individual  liability  of  stockholders  is  143 

Liability  of  incorporators  is 143 

ASSETS. 

Distribution  of,  to  stockholders  on  voluntary  liquidation  122 

Not  sufficient  to  pay  liabilities,  bank  insolvent  5 

Of  bank  in  hands  of  Superintendent  to  be  inventoried  62 

Not  subject  to  attachment  53 

Of  national  bank  transferred  to  State  bank  on  conversion 

thereof  108, 109 

Of  private  bank,  transfer  of,  upon  incorporation  105 

Placed  in  hands  of  Superintendent  by  directors 52 

Transfer  or  assignment  of,  after  notice  posted  or  possession 

taken,  void  53 

Transferred  on  consolidation  or  merger  115 

ASSIGNMENT. 

Fraudulent,  of  securities  of  bank,  a  felony 212 

For  creditors  not  permitted   54 

Of  assets,  after  posting  notice  or  possession  by  Superintendent, 

void    53 

Of  assets  by  insolvent  banks,  void  190 

ASSISTANT  SUPERINTENDENT. 

Acting  as  Superintendent,  salary  and  bond  of  9 


140  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

ASSISTANT  SUPERINTENDENT— Continued. 

Acts  where  vacancy  occurs  in  office  of  Superintendent 9 

Appointed  how  16 

Bond  of   17 

Duties  and  qualifications  of  16 

Ex-officio   examiner 16 

Liable  on  bond  for  nonperformance  of  duty 27 

Oath  of 17 

Salary  of   18 

Payable  from  what  fund  20 

Superintendent,  may  discharge    16 

Vacancies  in  office  of,  fills  9 

Term  of  office  of 16 

Traveling   expenses    ._ 19 

Payable  from  what  fund 20 

ASSOCIATIONS. 

See  Building  and  Loan  Associations ;    National  Banks  ;    Volun- 
tary Associations. 

ATLANTA. 

Additional  depositories  in   256,  257,  258,  259 

ATTACHMENT. 

None  where  possession  taken  by  Superintendent 53 

ATTORNEY  GENERAL. 

Advise   Superintendent    29 

ATTORNEYS,  AGENTS  AND  ACCOUNTANTS. 

Compensation  of,  how  fixed,  and  paid  73 

Superintendent  may  appoint,  to  assist  in  liquidating  bank  60 

AUDIT  EXPENSES. 

Superintendent  must    19 

B. 
BAD  DEBTS. 

Deducted  from  profit  before  dividends  declared 174 

Meaning  of  174 

BANK. 

Acquire  trust  company  powers,  how  246 

Business   methods    unsafe,    Superintendent   may   order    discon- 
tinued    45 

Call  for  reports  mailed  to 42 

Closed,  Superintendent's  report  must  show   22 

Definition    of    1 

Directors,  managed  by   145 

Dividends,  must  report  to  Superintendent 43 

Examined   semiannually    30 

Specially  31 


INDEX  TO  STATUTES.  141 

[References  Are  to  Sections.] 

BANK— Continued. 

Failing  to  make  or  publish  report,  penalty 44 

Failure  of,  defined   141 

Includes  all  corporations  doing  banking  business   1 

Includes    branches    1 

Incorporated,   how    79 

Incorporated  as  trust  company,  how   247 

In  liquidation,  Superintendent  to  report 78 

Insolvency  of,  defined   5 

Liability,  restriction  of   169 

Loans,  limit  of  157 

List  of,  Superintendent's  report  to  contain  22 

National,  may  exercise  trust  powers 252 

No  lien  on  its  stock  except  for  unpaid  installments  88 

Not  include  building  and  loan  association 1 

National  bank  1 

Private  banker  3 

Opening,  without  permit,  misdemeanor  199 

Possession  of,  when  Superintendent  may  take 51 

Powers  of    136 

Private  banker  must  not  advertise  as 4 

Right  to  establish  branches  • 3 

Resume  business,  when 5 

Special  reports,  made  to  Superintendent  on  call  41 

Stated  reports  by    40 

Call   for,   mailed    42 

Contents  of   40 

Summary  of  condition,  Superintendent's  report  to  contain  ....  22 

Surrender  of,  to  Superintendent  52 

Taken  possession  of,  Superintendent's  report  must  show   22 

Unsafe  to  do  business,  possession  may  be  taken 51 

BANK  BUREAU. 

Records  and  property  of,  transferred  to  Department  of  Banking  231 

BANK  CHARTER. 

See  Charter. 

BANK  EXAMINERS. 

See  Examiners. 

BANK  INSOLVENT. 

Order  of  paying  debts   69 

When  assets  insufficient  to  pay  liabilities    5 

When  can  not  meet  obligations   5 

When  reserve  not  made  good   5 

BANKING  ACT. 

Repeals  conflicting  laws   232 

When  to  take  effect    231 

Willful  violation  of,  misdemeanor   223 


142  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

BANKING,  DEPARTMENT  OF. 

Charged  with  execution  of  laws 7 

Created   7 

Expenses  of    20 

Rules  for,  Superintendent  may  make 24 

Seal  of   15 

BANKING  HOUSE,  FURNITURE  AND  FIXTURES. 

Limitation  on  value  of   168 

BANKING  LAWS. 

Superintendents  may  suggest  amendments  to  22 

Superseded  by  act  231 

BANKING  POWERS. 

How  trust  company  may  acquire   237 

BANKRUPT  DEPOSITOR. 

Payment  of  check  of  184 

BILLS  OF  EXCHANGE. 

Drawn  against  existing  values  not  included  in  limit  of  loans  . .  157 

Deposits  not  included  in  limit  of  bank's  liability 169 

BLANKS  FOR  EXAMINATIONS  AND  REPORTS. 

Superintendent   supplies    24 

BOARD  OF  DIRECTORS. 

See  Directors. 

Elected  annually    145 

Meetings   of    148 

Minutes  of,  how  kept  148 

Number  and  election  of  145 

Number  of,  how  changed  145 

Quorum    148 

BOND. 

Assistant  Superintendent  and  examiners',  premium  on  17 

National  bank  acting  as  fiduciary  not  relieved  of  254 

Of  agent  and  assistants  in  liquidating  bank  required 61 

Officers  of  bank,  custodian  of   154 

State   depository    263,  267,  275 

How  sureties  may  be  relieved   266 

State  Treasurer  not  affected  by  creation  of  State  depositories  . .  273 

Stockholders'  agent    76 

Superintendent    , 12 

Superintendent  and  examiners'  suit  on 27 

Superintendent,  premium  paid  by  State  12 

BONDS. 

Bank  may  not  purchase  except  certain  enumerated  167 

Deposited  by  State  depository  may  be  sold  when  269 

May  be  deposited  by  State  depository  as  security  for  deposit  . . .  267 


INDEX  TO  STATUTES.  143 

[References  Are  to  Sections.] 

BONDS— Continued. 

U.  S.,  State,  county,  district  or  municipal  loans  secured  by 157 

And  foreign  government,  banks  may  purchase  167 

BOOKS. 

False  entries  in,  making,  a  felony   202 

BORROWING  BY   OFFICER  OR  EMPLOYEE. 

For  himself  or  his  firm  without  approval  of  directors,  a  misde- 
meanor      213 

None,  except  by  permission  of  directors  155 

BRANCH  BANK. 

Capital  set  aside  for  and  amount  required   3 

Cashier  elected  by  board  of  directors,  parent  bank 3 

Conducted  how    3 

Defined 3 

Directors  of    3 

Established,    how    3 

Fees  for  examination  of 34 

Included  in  term  "bank"   1 

Officers  of 3 

Operated  under  name  and  control  of  parent  bank  and  directors  3 

Taxed  how   3 

BUILDING  AND   LOAN  ASSOCIATION. 

Not  included  in  term  "bank"   1 

BUSINESS. 

Authorized  to  begin,  may  be,  when    85 

Conducted  unsafely,  possession  may  be  taken  ." 51 

Methods  unsafe,  Superintendent  may  order  discontinued  45 

Permit  to   begin    86 

Resumed  after  possession  taken,  when   56 

To  be  conducted,  application  for  charter  must  show  79 

Transacting,  by  bank  without  permit,  misdemeanor  199 

When  bank  to  begin,  information  to  be  furnished  Superintendent  82 

BY-LAWS. 

Lien  on  stock,  bank  can  not  have  by 88 

Of  trust  company  239 

Power  of  bank  to  make   136 

c. 

CALCULATION. 

Of  liquidation   dividends    71 

Profits  before  paying  dividends  176 

CALLS  FOR  REPORTS. 

Made  by  Superintendent   40 

Mailed  to  banks    .  42 


144  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

CAPITAL. 

Allowing  withdrawal  of,  a  misdemeanor  217 

Branch  bank,  amount  required  3 

Dividend  may  not  be  paid  from  174, 176 

Falsely  representing,  a  felony  206 

Impaired  and  not  restored,  possession  may  be  taken 51 

Impaired,  assessment  to  restore  49 

How  enforced  50 

Impaired,  how  restored  48 

Surplus  transferred  to  restore  48 

Increase  offered  to  stockholders  97 

Increase  of,  from  surplus  and  profits  96 

Not  sold  for  less  than  par  and  for  cash 97 

Increased  or  decreased  by  amendment,  how 89 

Minimum,  not  subscribed,  organizers  of  bank  personally  liable..  142 

Misuse  of,  a  misdemeanor  217 

Necessary  to  qualify  bank  as  trust  company 246 

Over-issuing,  a  misdemeanor  218 

Paid  before  certificate  to  begin  business  issued  86 

Paid  by  transfer  of  assets  of  dissolved  national  bank 108 

Paying  by  note,  a  misdemeanor  217 

Payment  of  85 

By  transfer  of  assets  of  private  bank   104 

How  enforced 87 

Power  of  bank  to  increase  or  decrease 136 

Required  of  corporation  seeking  trust  company  powers 241,  244 

Required  to  incorporate  bank 79 

Sales  to  pay  installment  thereof  - 87 

Stock,  lien  of  bank  on  88 

Trust  company,  amount  to  be  paid  in 233 

Increase  of    240 

Required  237 

Using  to  purchase  shares,  a  misdemeanor  : 216 

When  and  how  to  be  paid  in,  information  furnished  . . . ". 82 

CASH. 

Directors  must  count  149 

CASHIER. 

To  give  bond   154 

CERTIFICATE. 

Deposit,  of,  see  Certificate  of  Deposit. 

Granting  trust  company  powers  to  bank  249 

Time,  see  Time  Certificate. 

CERTIFICATE  OF  AMENDMENT. 

To  be  issued  and  recorded  95 

CERTIFICATE  OF  DEPOSIT. 

Fraudulently  issuing,  a  felony 212 


INDEX  TO  STATUTES.  145 

[References  Are  to  Sections.] 

CERTIFICATE  OF  DEPOSIT— Continued. 

Holder  of,  is  a  depositor  2 

Not  to  be  issued  except  for  money 162 

Purchasing  at  a   discount  by  officer   of   issuing  bank,   a   mis- 
demeanor      215 

CERTIFICATE  OF  INCORPORATION. 

How  issued,  contents  of  84 

Of  trust  company   235 

CERTIFICATE  OF  PAYMENT. 

Installments  of  capital    85 

CERTIFICATE  OF  PUBLICATION. 

Application   for  charter    83 

For  renewal  of  charter  102 

To  amend  charter  94 

CERTIFICATE  OF  RENEWAL. 

Of  charter  to  be  issued  and  recorded 103 

CERTIFICATE  OF  SUPERINTENDENT. 

Approving  amendment  of  charter 93 

Renewal  of  charter   101 

CERTIFIED  CHECK. 

Certification  must  be  entered  on  face  of  check 181 

Charged  at  once  to  drawer's  account   181 

Improperly  certifying,  a  misdemeanor  219 

Obligation  of  the  certifying  bank  181 

Officers  authorized  to  certify  181 

Only  when  drawer  has  funds  sufficient  to  cover 181 

CHARGED  OFF. 

Certain  items  must  be    151 

Superintendent  may  order  items   152 

CHARTER. 

Amended,    how    89 

Amendment  of,  application  for   90 

Application  referred  to  Superintendent   92 

Application  for,  to  be  published   91 

Certificate  of  publication  of  94 

Certificate  to  be  issued  and  recorded   95 

Examination  and  approval  by  Superintendent 93 

Fee   for    90 

To  confer  trust  company  powers 246 

Application   for    79 

How   filed    79 

Referred  to  Superintendent  81 

To  be  published    . .  .- 80 

What  to  contain   79 

10 


146  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

CHARTER— Continued. 

Application  to  renew,  referred  to  Superintendent   100 

Certificate .  of  publication   102 

To  be  published  78 

Application  to  surrender,  publication  of  124 

Referred    to    Superintendent    , 125 

Cause  of  forfeiture  of   129 

Certificate,  of  publication  of  application 83 

Of  renewal  of,  to  be  issued  and  recorded 103 

Changes,  Superintendent's  report  shall  show   22 

Fee  for  79 

For  trust  company,  fee  to  be  paid 233 

Forfeited,  bank  liquidated,  how  131 

Forfeiture  of,  for  refusal  to  obey  orders  of  Superintendent 129 

Issued    how    84 

No  suit  to  forfeit,  except  by  Superintendent 132 

Of  trust  company,  application  for  233 

Proceedings  to  forfeit  130 

Renewed,    how    98 

Renewal  of,  examination  and  certificate  of  Superintendent 101 

Application  for,  publication  of  99 

Stockholders  authorize    98 

Right  to  renew    136 

Special,  how  amended    89 

Surrender  of,  certificate  of  publication  of  application  127 

Examination  and  certificate  of  Superintendent  126 

Or  forfeiture  of,  not  affect  liability  of  stockholders  or  di- 
rectors     144 

Violating,  presumption  against  officer  or  director  205 

Violating  provision  of,  a  felony,  204 

Ground  of  forfeiture  129 

Superintendent  may  order  discontinuance   45 

Possession,   may  take    51 

Violation  of  banking  law,  ground  of  forfeiture  129 

Voluntary  surrender  of    117, 123 

CHECK. 

Certified,  becomes  obligation  of  the  certifying  bank  181 

Charged  at  once  to  drawer's  account  181 

Collected  but  not  remitted,  lien  on  bank's  assets  for 178 

Collecting  bank  not  liable  for,  until  it  receives  proceeds  of 179 

Forged  or  raised,  liability  of  bank  paying 188 

Improperly  certifying,  a  misdemeanor    219 

May  be  forwarded  direct  to  payor  bank 180 

Not  to  be  certified  unless  drawer  has  funds  to  cover 181 

Of  deceased,  bankrupt,  or  insane  depositor,  payment  of 184 

Of  minor  against  funds  deposited  by  him. 185 

Officers  authorized  to  certify    181 


INDEX  TO  STATUTES.  '147 

[References  Are  to  Sections.] 

CHECKING  WITHOUT  FUNDS. 

A  misdemeanor    226 

CITY  OR  TOWN  WHERE  BANK  TO   BE  LOCATED. 

Application  must  show   79 

CLAIMS  AGAINST  BANK  IN  HANDS  OF  SUPERINTEN- 
TENDENT. 

How  proved    63 

List  of,  made  up  and  filed  67 

Notice   to   prove 63 

Objections  to,  how  passed  on    66 

Presented  after  time  fixed 68 

Superintendent  may  reject    65 

CLERK,  OFFICER  OR  DIRECTOR. 

Making  false  entries,  a  felony  202 

CLERKS,  BANKING  DEPARTMENT. 

Duties    of 16 

Must  not  owe  bank    16 

Qualifications  of   16 

Salaries   of    18 

Payable   from  what   fund 20 

Superintendent    appoints    16 

May  discharge    16 

Terms  of  office  of   16 

CLERK'S  OFFICE  OF  SUPERIOR  COURT. 

Inventory  of  assets  of  bank  in  hands  of  Superintendent  to  be 

filed   in    62 

COLLATERALS. 

Loans  on   161 

COLLATERALS  COLLECTED. 

Lien  for  on  bank's  assets  177 

COLLECT  AMOUNTS  DUE  BANK. 

Superintendent  may,  when  possession  taken   57 

COLLECTING  BANK. 

Due  diligence  by 179 

May  forward  check  or  other  instrument  direct  to  payor  bank  . .       180 

COLLECTIONS. 

Liability  of  bank  handling  179 

Made  by  Department,  Superintendent's  report  to  show   22 

On  collaterals  covered  by  trust  receipt,  lien  for 177 

COMMERCIAL  PAPER  RE-DISCOUNTED. 

Not  included  in  limit  of  bank's  liability   169 

COMMISSIONS. 

For  depositing  State's  fund  in  depository,  officer  receiving  guilty 

of   felony    262 

On  loans,  bank  officer  receiving,  a  misdemeanor  209 


148  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

COMMUNICATIONS    FROM    SUPERINTENDENT. 

Must  be  submitted  to  directors   46 

COMPENSATION  OF  ATTORNEYS,  AGENTS  AND  AC- 
COUNTANTS. 

How  fixed  and  paid    73 

Must  be  approved  by  Judge  of  Superior  Court ' 73 

COMPROMISE  CLAIMS  AGAINST  BANK. 

Where  possession  taken,  Superintendent  may  57 

CONCEALING  LOANS  FROM  DIRECTORS. 

A  misdemeanor   208 

CONDITION  OF  BANK. 

Disclosing,   misdemeanor    194 

False  statement  of,  a  felony  200 

Report  of  examination  prima  facie  evidence  of 39 

CONSERVE  ASSETS. 

Where  possession  taken,  Superintendent  may  57 

CONSOLIDATION  OR  MERGER. 

Agreement  submitted  to  stockholders  112 

Affected  how    Ill 

Effect  of 115 

Fee    for    examination    34 

Must  be  approved  by  Superintendent   112 

Notice  of,  to  be  published  113 

Rights  of  creditors  and  others  preserved  116 

Surrender  of  old  stock  and  issue  of  new 114 

CONTEMPT. 

Failing  to  appear  for  examination  is  32 

CONTRACT  DEBTS. 

Rank  of,  in  paying  debts  of  insolvent  bank  69 

CONTRACT  FOR  MERGER  OR  CONSOLIDATION. 

Submitted  to  stockholders 112 

CONVERSION. 

National  bank  info  State  bank   107 

Private  bank  into  State  bank  104 

COPARTNERSHIP. 

Banks,  not  included  in  term  J 

CORPORATE  POWERS. 

Banks  136 

Trust  companies    236 

CORPORATE  STOCKS. 

Bank  can  not  invest  in  166, 167 

Limit  of  loans  secured  by  161 


INDEX  TO  STATUTES.  149 

[References  Are  to  Sections.] 

CORPORATIONS. 

Chartered  by,  legislature  may  acquire  trust  company  powers   .  .  241 

Superior  Court  may  acquire  trust  company  powers 242 

CORRUPTION  IN  OFFICE. 

Superintendent,  examiner  or  clerk,  a  misdemeanor  196 

COTTON  EXPORTING  CORPORATION. 

Bank  may  subscribe  for  stock  in  167 

COUNTY,    DISTRICT    AND    MUNICIPAL    VALIDATED 
BONDS. 

Bank  may  purchase   167 

Loans  secured  by,  no  limit  to  amount  of 157 

COUNTY  FUNDS. 

State  depositories  to  give  bond  to  protect    276 

COUNTY  TREASURERS. 

May  deposit  in  State  depositories    275 

To  pay  interest  from  State  depositories  into  county  treasury  . .  277 

CREDITORS. 

Assignment  for,  not  permitted  54 

Liability  of  bank  -  to    137 

Of  bank  in  hands  of  Superintendent,  notice  to  prove  claims  ...  63 

Of  national  bank  not  affected  by  its  conversion  into  State  bank  110 

Private  bank,  not  affected  by  its  incorporation  106 

Paid,  stockholders  decide  as  to  how  liquidation  completed 75 

Rights  of,  preserved  on  consolidation  or  merger  116 

CRIMES  AND  MISDEMEANORS. 

Accepting   employment    from   bank   by   Superintendent   or   ex- 
aminer      198 

Accepting  note  in  payment  of  capital  217 

Allowing  capital  to  be  withdrawn   217 

Certifying  checks  improperly   219 

Checking  without  funds   226 

Concealing  loans   from  directors    208 

Declaring  unearned  dividends    217 

Disclosing  condition  of  bank  by  examiner  194 

Embezzlement    212 

Examination,  false  report  of  195 

Giving  notice  of    193 

False  entries,  in  books,  reports  or  statements 202 

Expense  account,   rendering    197 

Oath  on  examination  201 

Statement  of  condition   200 

Falsely  advertising  that  deposits  are  insured 207 

Representing  capital   stock    206 

Insolvency  of  bank  deemed  fraudulent  220 


150  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

CRIMES  AND  MISDEMEANORS— Continued. 

Lending  to  officer,  director  or  employee  without  approval  of  di- 
rectors     214 

Libel  of  bank  224 

Loans  or  gratuities  to  Superintendent  or  examiners 198 

Misappropriating  funds  or  property  of  bank 210-212 

Misdemeanor,  punishment  for   • 230 

Misuse  of  capital  stock  217 

Neglect   of    duty   or   misconduct   of    Superintendent,   examiner 

or   clerk    196 

Officer'  or  employee  borrowing  for  himself  or  his  firm 213 

Opening  bank  without  permit 199 

Overdrafts  of  officers,  directors  or  employees 211 

Over-issue  of  capital  218 

Private   banker,   using  unauthorized   name,    failing  to   provide 

signs,    etc., 227 

Purchasing  bank's  obligations  at  a  discount  215 

Shares  with  capital  216 

Receiving  commission  on  loans 209 

Deposits  by  insolvent  bank 221 

Refusing  to  make  statements  or  reports  203 

Slander  of  bank   225 

Stockholder  failing  to  give  pledgee  notice  of  assessment   228 

Transfers  to  hinder,  delay  or  defraud  creditors  222 

Violating  charter  of  bank 204 

Presumption  against  officer  205 

Wilful  violation  of  banking  act  223 

D. 

DAMAGES,  CLAIMS  FOR. 

Rank  of,  in  paying  debts  of  insolvent  bank 69 

DEATH  OF  SUPERINTENDENT. 

Assistant    acts    9 

DEBTS. 

Bad,  to  be  deducted  from  profits  before  dividends  declared  ....  174 

Due  county  or  city,  rank  of 69 

State,  priority  of  69 

Of  insolvent  bank,  order  of  paying  69 

DECEASED  DEPOSITOR. 

Payment  of  deposit  of   192 

Check  of 184 

DECLARING  UNEARNED    DIVIDENDS. 

A  misdemeanor   217 

DECREASE  CAPITAL  STOCK 

Power  of  bank  to  .  136 


INDEX  TO  STATUTES.  151 

[References  Are  to  Sections.] 

DEFINITION  OF. 

Bad   debts    174 

Bank 1 

Branch  bank   3 

Demand    deposits 171 

Failure  of  bank  141 

Insolvency 5 

Surplus    6 

Undivided  profits    6 

DEMAND. 

Certificates,  holders  of,  depositors   2 

Deposits,  meaning  of  171 

DEPARTMENT  OF  BANKING. 
See  Banking,  Department  of. 

DEPOSIT. 

Certificate  of,  not  to  be  issued  except  for  money 162 

Demand,  meaning  of   171 

Of  funds,  by  Superintendent 20 

Trust  funds,  trust  company  may  accept  236 

DEPOSITOR. 

Assessment  of  stockholders  to  pay 70 

Deceased,  bankrupt,  or  insane,  payment  of  check  of 184 

Payment  of  deposit  of   192 

Definition   of    2 

Holder  of  certificate  of  deposit  is  2 

Liability  of  stockholders  to  137 

Of  bank  in  hands  of   Superintendent,  notice  to  turn  in  pass 

books 64 

Rank  of,  in  paying  debts  of  insolvent  bank 69 

Right  of,  preserved  on  consolidation  or  merger  116 

DEPOSITORIES. 

See  State  Depositories. 
DEPOSITS. 

Bank  in  voluntary  liquidation  must  deposit  funds  to  cover 121 

Bank  in  liquidation,  Superintendent  to  report   78 

By  agent  or  fiduciary,  payment  of  186 

Corporation  receiving,  included  in  term  bank  1 

Foreign  administrator  or  executor  may  check 279 

In  bank  in  hands  of  Superintendent,  list  made  and  filed 67 

Insolvent  bank  for  itself  or  its  stockholders,  void  190 

Unclaimed,  shall  be  deposited  for  owners  74 

Insured,  falsely  advertising,  a  misdemeanor  207 

In  State  depositories  limited  to  amount  of  bond 267 

In  two  names,  payment  of  183 

Minors    185 

Not  included  in  limit  of  bank's  indebtedness  .  169 


152  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

DEPOSITS — Continued. 

On  pass  books  agreeing  with  books  of  bank,  prima  facie  correct  64 

Power  of  bank  to  receive  and  pay  out  136 

Receiving,  by  insolvent  bank,  a  felony 221 

Savings,    rules    governing    191 

Special,  power  of  bank  to  receive  136 

Trust  company  may  not  receive  unless  incorporated  as  bank  . .  237 

Trust,  payment  of    *. 187 

Unclaimed,  Superintendent's  report  must  show  22 

DILIGENCE,  DUE. 

On  part  of  collecting  bank ^ 179 

To  forward  check  direct  to  payor  bank 180 

DIRECTORS. 

Action  on   report  of   examination  to  be  certified  to   Superin- 
tendent      151 

Board  of,  see  Board  of  Directors. 

Communications  from  Superintendent  must  be  submitted  to  ...  46 

Concealing  loans  from,  a  misdemeanor   208 

Elected  annually 145 

Examination,  action  on  report  of 151 

Report  of,  spread  on  minutes 149 

What  to  contain   150 

Failure  to  make 152 

Falsely  representing  capital  stock,  guilty  of  felony  206 

First,  those  named  in  application  for  charter 86 

Forfeiture  of  office  146 

Liability  of,  for,  allowing  excess  loan  158 

Not  affected  by  surrender  or  forfeiture  of  charter  144 

Loans  to,  must  be  secured  156 

Making  loan  or  gratuity  to,  or  employing   Superintendent  or 

examiner,  guilty  of  misdemeanor   198 

False  entries  guilty  of  a  felony  202 

May  call  meeting  of  stockholders  for  voluntary  liquidation 117 

Declare  dividends,  when  173 

Surrender  possession  to  Superintendent  52 

Meeting  of 148 

Quorum    148 

Minutes,  how   kept 148 

Must  be  submitted  to  examiners  148 

Must  acknowledge  orders  of  Superintendent  45 

Examine   bank   semiannually    149 

Expressly  authorize  loans  to  officers  and  employees 155 

Names  of  first,  to  be  furnished  Superintendent  82 

Number  and  election  145 

Of,  application  for  charter  must  show  79 

How  changed   145 

Oath  of    147 

Filed  with  Superintendent  147 


INDEX  TO  STATUTES.  153 

[References  Are  to  Sections.] 

DIRECTORS— Continued. 

Obligation  of  bank  cannot  purchase  for  less  than  face  value  . .  170 

Of  bank  with  trust  powers  act  as  trustees 251 

Of  branch  bank  3 

Officers  of  bank,  bond,  shall  require  of  * 154 

Power  of  bank  to  increase  or  decrease  number  of 136 

To  merge  or  consolidate   Ill 

Presumed  to  know  of  violation  of  charter 205 

Qualifications  of    146 

Refusing  to  make  reports  of  statements,  guilty  of  misdemeanor  203 

Set  aside  surplus 6 

To  call  meeting  to  assess  to  restore  impaired  capital 49 

To  elect  officers   153 

Transacting  business  before  permit  issued  to  bank,  guilty  of 

misdemeanor 199 

Verification  of  reports  by  40 

Verifying  false  statement  of  condition,  guilty  of  a  felony 200 

Violating  charter,  guilty  of  a  felony 204 

DISABILITY  OF  SUPERINTENDENT. 

Assistant   acts    9 

DISCLOSING  CONDITION  OF  BANK. 

Obtained  by  examination,  a  misdemeanor 194 

DISCOUNT. 

Its  obligation  at  more  than  legal  rate,  bank  can  not 170 

Of  commercial  paper  owned  by  borrower  not  included  in  his 

line  of  credit  157 

Paper  for  officer,  director  or  employee  without  approval  of 

directors,  a  misdemeanor  214 

Power  of  bank  to  136 

DISCOUNTING. 

Bank  paper,  a  misdemeanor,  when  215 

DISQUALIFIED  TO  'HOLD  OFFICE. 

Superintendent  or  examiner  who  accepts  loan,  gratuity  or  em- 
ployment from  bank,  is  198 

DISSOLUTION. 

Bank 128 

Not  affect  liability  of  stockholders  or  directors  144 

National  bank  for  conversion  into  State  bank 107 

DIVIDENDS. 

Declaring,  unearned,  a  misdemeanor  217 

Foreign  administrator  or  executor  may  check  for,  how 279 

How  profits  must  be  calculated  before  paying 176 

Liquidation,  disputed  claims  included  in  calculation  of 71 

How   paid    71 

Unclaimed,   deposited    for   creditors    74 


154  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

DIVIDENDS— Continued. 

Must  be  reported  to  Superintendent  43, 173 

Not  declared,  if  reserve  not  maintained  172 

Except  from  profits   174, 176 

Not  paid  when  surplus  impaired  175 

Paid  to  creditors,  Superintendent's  report  must  show 22 

Unearned,  prohibited   174 

When  may  be  declared  173, 174, 175, 176 

DOMESTIC  ACCEPTANCES. 

By  bank  members  Federal  Reserve  System 164 

Foreign  and  164 

DOUBLE  LIABILITY   OF  STOCKHOLDERS. 

To  depositors   137 

DRAFT  COLLECTED  BUT  NOT  REMITTED. 

Lien  on  bank's  assets  for   178 

DUTIES. 

Neglect  of,  by  Superintendent,  assistant,  or  examiner,  a  misde- 
meanor           196 

DUTIES  AND  POWERS. 

Of  stockholders'  agent   76 

E. 
EFFECT  OF. 

Consolidation  or  merger    115 

Conversion  of  national  bank  into  State  bank  109 

Posting  notice  or  possession  by  Superintendent 53 

ELECTION. 

Directors    145 

Stockholders'  agent 76 

EMBEZZLEMENT. 

By  officer  or  employee,  a  felony 212 

EMERGENCY. 

Bank  may  be  authorized  to  borrow  in  excess  of  limit  to  meet  . .       169 

EMPLOYEES  OF  BANK. 

Loans   to    155, 156 

Overdrafts,  liability  for  • 160 

Power  of  bank  to  appoint  - 136 

Superintendent  may   remove 47 

EMPLOYMENT     OF     SUPERINTENDENT     OR     EXAM- 
INER. 
By  bank,  misdemeanor 198 

ENDORSEMENTS  OF  CHECKS  AND  DRAFTS. 

Not  included  in  limit  of  bank's  liability  169 


INDEX  TO  STATUTES.  155 

{References  Are  to  Sections.] 

ENFORCEMENT. 

Of  payment  of  capital 87 

ENTRIES. 

False,  in  books,  statements  or  reports,  making,  a  felony 202 

Fraudulently  omitting,  a  felony  202 

ESTATES. 

Liable  on  stock  assessments  138 

Trust  company  may  manage  236 

EVIDENCE. 

Of  debt,  purchasing,  at  a  discount  by  officer  of  issuing  bank, 

a   misdemeanor    215 

Paper  under  seal  of  department  as   15 

Reports  of  examination,  prima  facie  39 

Reports  of  Superintendent  and  examiners,  prima  facie   26 

EXAMINATION. 

By  directors    149 

Action  on  report  of 151 

Contents  of  report  of   150 

Failure  to  make   152 

Report  of,  must  be  furnished  Superintendent  149 

Report  of,  spread  on  minutes   149 

By  Superintendent  before  amendment  of  charter 93 

Before  renewal  of  charter  granted  101 

Court,  contempt  of,  witness  failing  to  appear  32 

Expenses  of,  record  of,  Superintendent  must  keep  36 

False  report  of,  by  examiner,  a  felony  195 

Fees    for 34 

Collected,  how    35 

Record  of,  Superintendent  must  keep  36 

Giving  notice  of,  misdemeanor   193 

"Information  obtained  by,  kept  secret  38 

Not  at  stated  times   37 

Of  bank  in  voluntary  liquidation  120 

What  to  include    30 

Of  branch  bank,  fees  for  34 

On  oath,  examiners  may  make : 32 

Private  bank  seeking  incorporation  104 

Refusing  to  permit,  possession  may  be  taken   51 

Reports  of,  filed  in  Superintendent's  office  25 

Given  to  Federal  Reserve  Bank   38 

Prima  facie  evidence  39 

Written,  filed    33 

Special   fees   for    34 

May  be  ordered,  when   31 

Summary  of,  published  in  Superintendent's  report  38 

Time  of,  kept  secret   37 


156  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

EXAMINATION— Continued. 

To  be  made  before  permit  to  begin  business  issued 86 

Semi-annually 30 

EXAMINER. 

Accepting  loan,  gratuity  or  employment  from  bank,  guilty  of 

misdemeanor    198 

Bond  of 17 

Disclosing  condition  of  a  bank,  guilty  of  a  misdemeanor 194 

Duties  of 16 

Ex-officio  Assistant  Superintendent  is  16 

Giving  notice  of  examination,  guilty  of  a  misdemeanor 193 

Liable  on  bond  for  non-performance  of  duty  27 

Making    false   report  of   examination   of   a   bank,   guilty  of  a 

felony    195 

May  compel  attendance  for  purpose  of  examination   32 

Minute  book  submitted  to   148 

Must  not  owe  bank 16 

Neglect  of  duty,  or  misconduct  by,  a  misdemeanor  196 

Not  disclose  information  obtained  by  examination  38 

Oath  of    17 

Oaths,  may  administer   32 

Qualifications  of    16 

Rendering  false  expense  account,  guilty  of  a  misdemeanor  ....  197 

Reports,  prima  facie  evidence   26 

Salary  of 18 

Scope  of  investigation  30 

Special,  Superintendent  may  appoint   24 

Superintendent    appoints    16 

May  discharge    16 

To  keep  time  of  visit  for  examinations  secret 37 

Traveling  expenses  of  19 

Payable  from  what  fund  20 

EXCESS  LOAN. 

Liability'of  directors  for  allowing  158 

Superintendent  may  order  reduced  to  legal  limit  157 

EXCHANGE. 

Power  of  bank  to  buy  and  sell  T 136 

EXECUTION. 

Superintendent  may  issue,  for  fees  35 

To  collect  assessment  of  stockholders    70 

EXECUTORS  OR  OTHER  FIDUCIARIES. 

Deposits  by,  payment  of  186 

Foreign,  may  check  deposits  and  transfer  stock,  etc.,  how 279 

National  bank  may  act  as   252 

Not  individually  liable  on  stock 138 

Trust  company  may  act  as   236  (12) 


INDEX  TO  STATUTES.  157 

[References  Are  to  Sections.] 

EXPENSE  ACCOUNT. 

False,  Superintendent  or  examiner  rendering,  guilty  of  misde- 
meanor           197 

EXPENSE  OF  PUBLISHING  AND  MAILING. 

Superintendent's    reports    23 

EXPENSES. 

Must  be  deducted  from  profits  before  dividend  declared  176 

Of  department,  how  paid  20 

Of  liquidation,  rank  of,  in  distribution  of  assets 69 

Of  Superintendent's  office  paid  by  State    14 

Traveling,  of  officers  of  department  19 

Payable  from  what  fund  20 

F. 
FAILURE  OF  BANK. 

Denned    141 

FAILURE  OF  DIRECTORS. 

To  make  examination   152 

FALSE  EXPENSE  ACCOUNT. 

Superintendent  or  examiner  rendering,  guilty  of  misdemeanor..       197 

FALSE  ENTRIES. 

In  books,  reports  or  statements,  making,  a  felony  202 

FALSE  OATH. 

On  examination,  making,  a  felony  201 

FALSE  STATEMENT. 

As  to  solvency  of  bank,  a  misdemeanor  224,  225 

Of  condition,  verifying,  a   felony   200 

FALSELY  ADVERTISING. 

That  deposits  are  insured,  a  misdemeanor 207 

FALSELY   REPRESENTING. 

Capital  stock,  a  felony 206 

FEDERAL  RESERVE  BANK. 

Bank  may  purchase  stock  in  167, 182 

Banks,  members  of  system,  may  conform  to  requirements  of  ...       182 
Report  of  examinations  of  member  given  to  38 

FEDERAL  RESERVE  SYSTEM. 

Acceptances  by  member  bank  164 

Reserve  required  of  member  bank 171 

FEES. 

Attorneys,  agents  and  accountants,  how  fixed  and  paid 73 

Collected  used  for  expenses  of  department   11 

Examination,  how  collected    35 

Of  branch  bank  34 

Schedule  of   .                                                       34 


158  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

FEES— Continued. 

For  amendment  of  special  charter   90 

Granting  trust  company  powers  to  bank 250 

Powers  to  other  corporations  241,  246 

Issuing  charter  of  bank  79 

Renewal  of  charter    98 

Record  of,  Superintendent  must  keep 36 

Special    examination    34 

Solicitors   general   for  representing   Superintendent    28 

Superintendent  shall  not  receive   11 

Trust  company  charter   233 

FIDUCIARIES. 

Liabilities  for  unauthorized  investments  in  bank  stock 138 

Not  individually  liable  on  stock   138 

FIDUCIARY  DEBTS. 

Rank  of    69 

FIDUCIARY  DEPOSITS. 

By  payment  of    186 

FISCAL  AGENT. 

Trust  company  may  act  as  236 

FOREIGN  ACCEPTANCES. 

By  bank  member  of  Federal  Reserve  Sytem  164 

FOREIGN  AND  DOMESTIC  ACCEPTANCES  164 

FOREIGN  GOVERNMENTS. 

Bonds  of,  banks  may  purchase  167 

FORFEITS  OFFICE. 

Superintendent  or  examiner  accepting  loan,  gratuity  or  employ- 
ment from  bank 198 

FORFEITURE  OF  CHARTER. 

Causes  of  129 

Liquidation  in  cases  of  131 

No  suit  for,  except  by  Superintendent  132 

Not  affect  liability  of  stockholders  or  directors  144 

Proceedings    for    130 

FORM  OF  REPORT. 

Prescribed  by  Superintendent  * 40 

FORMS. 

Prescribed  by  Superintendent  24 

FORGED  OR  RAISED  CHECKS. 

Liability  of  bank  paying  188 

FRAUDULENT. 

Check,  giving  of,  a  misdemeanor   226 

Insolvency  of  bank  deemed  to  be  220 

Transfers,  a  misdemeanor  222 


INDEX  TO  STATUTES.  159 

[References  Are  to  Sections.] 

FRAUDULENTLY. 

Issuing  certificate  of  deposit,  draft,  acceptance  or  other  paper, 
a  felony  212 

Obtaining  funds  or  property  of  bank  by  officer  or  employee,  a 
felony  212,  210 

Transferring  paper  of  bank,  a  felony 212 

FUNDS  OF  DEPARTMENT. 

Used  for  expenses  only   20 

Where  deposited   20 

FUNDS  OF  INSOLVENT  BANK. 

To  be  deposited  72 

G. 

GIFTS  OR  GRATUITIES. 

Receiving,  for  procuring  loan,  a  misdemeanor  209 

GOVERNOR. 

Appoints  State  depositories  255 

Superintendent    8 

Contracts  with  State  depository  for  interest  262 

Designates  counties  whose  collectors  deposit  in  State  de- 
positories    271 

May  remove  from  office  Superintendent,  examiner  or  clerk  for 

neglect,  misconduct  or  corruption  196 

State  depositories    261 

Superintendent,  when    10-13 

Superintendent's  reports  made  to   21 

GRAND  JURIES. 

Superintendent  to  submit  violations  of  laws  to  229 

GRATUITY. 

For  procuring  loan,  receiving,  a  misdemeanor   209 

To  Superintendent  or  examiner,  granting,  a  misdemeanor 198 

GUARANTEE. 

Real  estate  loans,  trust  company  may   236 

Titles  to  real  estate,  trust  company  may  236 

GUARANTY  FUND. 

Of  trust  company,  how  invested  236 

GUARDIAN. 

Deposits  by,   payment   of    186 

For  minors,  trust  company  may  act  as  236 

Not  individually  liable  on  stock 138 

I. 
IMPAIRED  CAPITAL. 

Assessment  to  restore   49 

Enforced  how    .  50 


160  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

IMPAIRED  CAPITAL— Continued. 

Must  be  restored    48 

Not  made  good,  possession  may  be  taken 51 

Where  stock  sold  to  pay  installment  87 

INCORPORATION. 

Certificate  of,  contents  of  84 

Effect   of    105 

Method    of    79 

Not  affect  creditors  or  depositors    106 

Of  private  bank 104 

Term  of   136 

INCORPORATORS. 

Liability  of,  enforced  only  by  Superintendent  143 

Is  asset  of  bank   143 

Number   required    79 

INCREASE  OF  CAPITAL. 

From  surplus  and  profits    96 

Offered  to   stockholders    97 

Power  of  bank  to    136 

Sold  only  for  cash  and  not  less  than  par 97 

INDEBTEDNESS   OF   BANK. 

Limitation    of     169 

INDIVIDUAL  LIABILITY. 

Of  stockholders  to  depositors    137 

INDUSTRIAL  PRODUCTS. 

Loans  secured  by   157 

INFORMATION. 

To  be  furnished  Superintendent  by  applicants  for  charter 82 

INJUNCTION. 

Against   Superintendent    58 

INSANE  DEPOSITOR. 

Payment  of  check  of  184 

INSOLVENCY  OF  BANK. 

Defined   5 

Deemed    fraudulent    220 

Transfers  after  or  in  contemplation  of,  void  190 

INSOLVENT  BANK. 

Funds  of,  to  be  deposited  72 

Order  of  paying  debts  of  69 

Receiving  deposits,  a  felony  221 

Transfers  to  hinder,  delay  or  defraud  by,  a  misdemeanor 222 

INSTALLMENTS   OF   CAPITAL. 

Lien  on  stock  for,  unpaid 88 

Payment  of  85 


INDEX  TO  STATUTES.  161 

[References  Are  to  Sections.] 

INSURED. 

Falsely  advertising  that  deposits  are,  a  misdemeanor  207 

INTEREST. 

Accrued  but  unpaid,  not  included  in  profits  176 

Contract  with  State  depository  for  262 

On  county  funds  deposited  with  State  depositories  277 

On  unclaimed  liquidation  dividends  and  deposits,  how  applied  . .  74 
Paid  or  accrued  on  bank's  obligations  deducted  from  profits  be- 
fore dividend  declared    176 

Rate  not  exceeding  eight  per  cent 163 

INVENTORY  OF  ASSETS. 

Of  bank  in  hands  of  Superintendent  to  be  made  and  filed 62 

Subject  to  inspection  62 

INVESTIGATION  OF  APPLICATION  FOR  CHARTER. 

By  Superintendent    81 

INVESTMENTS. 

Unauthorized,  corporate  stocks  and  commercial  products  are..  166, 167 

J. 
JANUARY  FIRST,  1920. 

Banking  Act  takes  effect  on  231 

JUDGE  SUPERIOR  COURT. 

To  issue  subpoena   for  bank  officer  and  punish   for  contempt, 

when    32 

JUDGMENTS. 

Failure  to  pay,  possession  may  be  taken  51 

Liens  and,  against  insolvent  bank,  order  of  paying  69 

Permitted  by  insolvent  bank,  void   .... 190 

L. 
LAND. 

Limit  on  loans  on  15S 

Purposes  for  which  bank  may  purchase  and  hold 168 

LAWS. 

All  banking  repealed  and  superseded  by  Banking  Act 231,  232 

Banking,  Superintendent  may  suggest  amendment  to   22 

Conflicting  with  Banking  Act  repealed  232 

Violation  of,  possession  may  be  taken 51 

To  be  reported  to  grand  jury  229 

LEGAL  PROCEEDINGS  AGAINST  BANK. 

Not  lie  when  possession  taken  by  Superintendent  53 

LEND  MONEY. 

Power  of  bank  to  ^ 136 

LENDING  TO  OFFICER. 

Director  or  employee  without  approval  of  directors,  a  misde- 
meanor     '. 214 

II 


162  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

LIABILITIES. 

Bank  unable  to  meet,  insolvent  5 

LIABILITY  OF  BANK. 

Limit  of  bank 169 

Paying  forged  or  raised  checks  188 

To  creditors    137 

LIABILITY  OF  DIRECTORS. 

For  allowing  excess  loan  158 

LIABILITY  OF  STOCKHOLDERS. 

Asset  of  bank 143 

Enforced  only  by  Superintendent  143 

Not  included  in  limit  of  bank's  indebtedness  169 

On  failure  of  bank  140 

To  depositors   137 

LIBEL  OF  BANK. 

A  misdemeanor   224 

LIEN  ON  BANK'S  ASSETS. 

For  check  collected,  but  not  remitted  178 

For  collaterals  collected  but  not  remitted 177 

LIEN  ON  STOCK. 

Bank  has  none,  except  for  installments  due  thereon   88 

For  unpaid  installments  thereon  88 

LIMIT  OF  LOANS. 

On  corporate  stock  161 

On  real  estate   159 

Secured  and  unsecured 157 

LIMITATION  ON  LIABILITY. 

Of  bank 169 

LIQUIDATE  BANK. 

Where  possession  taken,  Superintendent  may 57 

LIQUIDATION. 

Agent,  etc.,  appointed,  Superintendent  shall  require  bond 61 

Attorneys,  etc.,  necessary,  Superintendent  may  employ 60 

Dividends,  how  paid    71 

Expenses,  rank  of,  in  distribution  of  assets  of  insolvent  bank  . .  69 

Fees  for  examination 34 

No  suit  for,  except  by  Superintendent   132 

Voluntary,  and  dissolution,  how  accomplished  117 

Approval  of   Superintendent  necessary    118 

Assets  distributed  to  stockholders    122 

Examination  of  and  reports  by  bank  in  120 

Notice  of,  to  be  published    119 

Unpaid  deposits  and  claims,  deposit  of  funds  to  cover 121 

Where  charter  forfeited  131 


INDEX  TO  STATUTES.  163 
[References  Are  to  Sections.] 

LIST  OF  CLAIMS. 

Against  bank  in  hands  of   Superintendent,  made  and  filed  by 

Superintendent   67 

LIST  OF  OFFICERS. 

To  be  furnished  Superintendent 153 

LIST  OF  STOCKHOLDERS. 

To  be  sent  to  Superintendent  189 

LIVE  STOCK. 

Loans  secured  by   157 

LOANS. 

Bank  may  not  make,  if  reserve  below  limit  required  172 

Upon  security  of  its  own  stock 165 

Concealing  from  directors,  a  misdemeanor 208 

Excess,  liability  of  directors  for  allowing  158 

Superintendent  may  order  reduced  to  legal  limit 157 

Limit  of   157 

Not  apply  to  discount  of  commercial  paper  owned  by  bor- 
rower      157 

Where  secured  by  agricultural,  manufactured,  industrial 

products  or  live  stock 157 

Where    secured    by    bonds    of    United    States,    State, 

county,  districts  or  municipalities   157 

Not  include  discount  of  bills  drawn  against  existing  values  157 
Not  include  liability  of  endorsers  or  drawers  of  checks  or  bills 

deposited  or  cashed   157 

On  agricultural,  manufactured,  industrial  products  or  live  stock, 

limit  of  : 157 

On  bonds  of  United  States,  State,  counties,  districts  or  munici- 
palities, no  limit  on 157 

On  corporate  stock,  limit  of  161 

On  real  estate,  limit  of   159 

Or  personal  property,  trust  company  may  make 236 

On  stock  when  loans  to  corporation  included  in  limit  of  161 

Receiving  commission  on,  a  misdemeanor  209 

Secured,  limit  of 157 

To  officer  include  loans  to  partnership  of  which  he  is  member..  155 

To  officers  or  employees  of  banks  155, 156 

A  misdemeanor,  when    214 

None,  except  on  security  156 

To  person  include  those  to  partnership  of  which  he  is  a  member  157 
To  Superintendent  or  examiner,  bank  officer  making,  guilty  of 

misdemeanor  198 

LOSSES. 

Charged  to  surplus,  when 175 

Deducted  from  profits  before  declaring  dividends   176 

Include  certain  past-due  debts 176 


164  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

M. 
MACON. 

Additional  depositories  in 260 

MANDAMUS. 

Against    Superintendent    133 

Exceptions     135 

Trial   and   judgment 134 

MANUFACTURED    PRODUCTS. 

Loans  secured  by 157 

MARRIED  WOMEN. 

Trusts  for,  trust  company  may  execute 236 

.MEETINGS   OF   STOCKHOLDERS. 

For  election  of  directors 145 

To  assess  to  restore  impaired  capital 49 

When  creditors  of  bank  taken  charge  of  by  Superintendent  paid  75 

MEETINGS   OF   DIRECTORS    148 

How  called    148 

MERCHANDISE. 

Farm  or  manufactured  products,  bank  can  not  invest  in  166 

MERGER  OR  CONSOLIDATION. 

Agreement  submitted  to  stockholders   112 

Effect   of 115 

How    effected     Ill 

Must  be  approved  by  Superintendent  112 

Notice  of,  to  be  published   113 

Rights  of  creditors  and  others  preserved  116 

Surrender  of  old  stock  and  issue  of  new  114 

MINORS. 

Deposits  by   185 

MINUTE  BOOK. 

Must  be  submitted  to  examiners  148 

MINUTES. 

Communications  from  Superintendent  must  be  entered  on 46 

Of  directors,  how  kept  148 

Orders  of  Superintendent  must  be  entered  on  ' 45 

Report  of  directors'  examination  must  contain  149 

MISAPPROPRIATION. 

Of  funds  or  property,  a  felony 210,  212 

MISCONDUCT  OR  NEGLECT  OF  DUTY. 

By  Superintendent,  examiner  or  clerk,  a  misdemeanor  196 

MISDEMEANOR. 

Punishment  for   230 


INDEX  TO  STATUTES.  165 
[References  Are  to  Sections.] 

MISUSE  OF  CAPITAL. 

A    misdemeanor    217 

MUNICIPAL,   COUNTY   AND   DISTRICT  BONDS. 

Bank  may  purchase   167 

Loans  secured  by,  no  limit  to  amount  of 157 

MUNICIPAL  OR  CORPORATE  BONDS. 

Trust  company  may  act  as  trustee  for 236 

N. 
NAME. 

Application  for  charter  must  show  79 

How  changed   89 

Of  private  bank   4 

NATIONAL  BANK. 

Acting  as  fiduciary,  bond  of  254 

As  State  depository,  bond  of 267 

Authorized  to  act  as  trustee,  executor,  administrator  or  regis- 
trar      252 

Conversion  into  State  bank,  examination  by  Superintendent  . . .  108 

Converted  into  State  bank,  still  subject  to  suit  on  claim  against  it  110 

Directors  become  directors  of  State  bank  109 

Creditors  of,  not  affected  by  conversion  into  State  bank 110 

Effect  of  conversion  into  State  bank  109 

How  converted  into  State  bank  107 

May  be  State  depository 264,  267 

Not  included  in  term  "bank" 1 

Oath  as  fiduciary,  by  whom  taken 253 

Suits  against,  not  abate  by  its  conversion  into  State  bank 110 

NEGLECT  OF  DUTY. 

Or  misconduct  of  Superintendent,  examiner  or  clerk,  a  misde- 
meanor     .' 196 

NEGOTIABLE  PAPER. 

Power  of  bank  to  buy  and  sell  136 

NOTE,  IN  PAYMENT  OF  CAPITAL. 

Accepting,  a  misdemeanor  217 

NOTICE. 

Assessment  to  restore  capital  must  be  given  pledgee 50 

Call  for  reports,  mailing  is   42 

Examination,  of,  misdemeanor   193 

Merger  or  consolidation  to  be  published 113 

Stockholders'  meeting  after' creditors  paid,  how  given  75 

Surrender  of  possession  to  Superintendent  52 

Effect  of    53 

Taking  possession  of,  bank  Superintendent  must  give 55 

Voluntary  dissolution  to  be  published  119 


166  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

NOTICE  TO. 

Claimant  or  depositor  of  rejection  of  claim  65 

Creditor  of  bank  in  hands  of  Superintendent  to  be  given 63 

NUMBER  OF  DIRECTORS. 

Application  for  charter  must  show  79 

How  changed   145 

Power  of  bank  to  change  136 

NUMBER  OF  SHARES. 

Application  for  charter  must  show  79 

Required  to  qualify  directors   146 

O. 
OATH. 

Examination  on,  made  by  examiners  32 

False,  on  examination,  making,  a  felony 201 

Of  Assistant   Superintendent   17 

Directors 147 

Filed  with  Superintendent  147 

Officer  of  national  bank  acting  as  fiduciary 253 

Superintendent   12 

OBJECTIONS  TO  ALLOWANCE  OF  CLAIMS. 

Against  bank  in  hands  of  Superintendent 66 

OBLIGATIONS. 

Bank  may  not  purchase  its  own,  at  less  than  par 170 

Purchasing  at  a  discount,  a  misdemeanor  215 

OFFICE  OF  SUPERINTENDENT  14 

Open  daily  14 

OFFICE. 

Superintendent's,  term  of    8 

OFFICE,  PRINCIPAL. 

How  changed   89 

OFFICERS. 

Agents  and  employees,  power  of  bank  to  appoint 136 

Superintendent  may  retain  in  liquidating  bank 60 

Authorized  to  certify  check   181 

Bond,  must  give 154 

Borrowing  by,  a  misdemeanor,  when  213 

Directors  to  elect   153 

Or  clerks  making  false  entries,  guilty  of  a  felony 202 

Refusing  to  make  statements  or  reports,  guilty  of  mis- 
demeanor      203 

Discounting  bank  paper,  a  misdemeanor,  when,  215 

Embezzlement  by,  a  felony  212 

Liability  of,  for  allowing  overdraft 160 

List  of,  furnished  Superintendent  153 


INDEX  TO  STATUTES.  167 
[References  Are  to  Sections.] 

O  FFICERS— Continued. 

Loans   to    155, 156 

A  misdemeanor,  when,   214 

May  not  purchase  bank's  obligations  at  less  than  par 170 

Making  loan,  or  gratuity  to  or  employing  Superintendent  or  ex- 
aminer, guilty  of  misdemeanor 198 

Misappropriation  by,  a  felony 210 

Of  branch  bank  3 

Of  trust  company,  election  of   239 

Or   directors,    falsely   representing   capital   stock,   guilty   of   a 

felony    206 

Presumed  to  know  of  violation  of  charter 205 

Transacting  business  as  such  before  permit  issued  to  bank, 

guilty   of    misdemeanor    199 

Verifying  false  report  of  condition,  guilty  of  a  felony 200 

Violating  charter,  guilty  of  a  felony -. 204 

Overdrafts  by,  a  misdemeanor   211 

Refusing  to  be  examined,  possession  may  be  taken  51 

Superintendent  may  remove   47 

OFFICIAL  COMMUNICATIONS. 

Must  be  entered  on  minutes   46 

OPENING  BANK. 

Without  permit,  misdemeanor   199 

ORDER  DISSOLVING  BANK  128 

ORDER  OF  PAYING  DEBTS. 

Of  insolvent  bank 69 

ORDERS  OF   SUPERINTENDENT. 

Failure  to  observe,  possession  taken  51 

Must  be  read  by  directors 45 

Original  must  be  returned  45 

Refusal  to  obey,  ground  of  forfeiture   ; . .  129 

Removal  of  officer  or  employee  for  violation  of 47 

ORDINARY. 

Certificate  of  publication  of  application  for  charter 83 

Renewal  of  charter 102 

Surrender  of  charter    127 

To  amend  charter  94 

ORGANIZATION  BEFORE  STOCK  SUBSCRIBED. 

Liability    for    142 

OVERDRAFT. 

Board  of  directors  only  may  authorize  160 

By  officer,  director  or  employee,  a  misdemeanor  211 

Liability  of  officer,  permitting   160 

OVER-ISSUING  CAPITAL. 

A  misdemeanor   N 218 


168  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

P. 
PARTNERSHIP. 

Loans  to  member  of,  included  in  his  line  of  credit 157 

See  Copartnership. 

PASS  BOOKS. 

Entries  on  agreeing  with  bank's  books,  prima  facie  correct  ...  64 

Of  bank  in  hands  of  Superintendent  called  in  64 

Savings    rules    in    191 

PAYMENT  OF  CAPITAL. 

By  transfer  of  assets  of  national  bank  108 

How  enforced    87 

Within  what  time  85 

PAYMENT  OF  CHECK. 

Forged  or   raised    188 

Of  agent  or  fiduciary 186 

Of  deceased  bankrupt,  or  insane  depositor   184 

Of    minor    185 

PAYMENT  OF  DEPOSIT. 

In   trust    187 

In  two   names    183 

Of  deceased  depositor  192 

PAYMENT  SUSPENDED. 

Possession  may  be  taken  51 

PAYOR  BANK. 

Check  may  be  forwarded  direct  to  180 

PENALTIES. 

Deposited  as  other  funds  of  department    44 

Execution  for,  collection  of  44 

For  failure  to  make  or  publish  reports 44 

PERMIT    FOR   VOLUNTARY    LIQUIDATION. 

Required    118 

PERMIT  TO  BEGIN  BUSINESS. 

Fees    for   examination    34 

Opening  bank  without,  misdemeanor  199 

Record  and  copy  of  86 

PETITION    OF    BANK    TO    BE    INCORPORATED    AS 

TRUST  COMPANY. 
Contents  of   247 

PLACE  OF  BUSINESS. 

Application  for  charter  must  show  79 

How  changed   89 


INDEX  TO  STATUTES.  169 
[References  Are  to  Sections.] 

PLEDGEE  OF  STOCK. 

Failure  of  stockholder  to  give  notice  of  assessment  to,  a  mis- 
demeanor   228 

Stockholder  must  notify,  of  assessment  to  restore  capital  50 

POSSESSION    OF    BANK    BY    SUPERINTENDENT. 

Agent,  Superintendent  may  appoint  to  assist  him '. 59 

Bond,  shall  require  of  61 

Assignment  by  surrendering  possession  to  Superintendent 54 

Collects  money  due  bank  57 

Directors  may  surrender  to  Superintendent  52 

Effect  of    53 

Enjoined,  when    58 

Notice  of  taking,  must  be  given 55 

To  creditors  published    63 

Pass  books  called  in   64 

Taken  when  bank  is  unsafe  to  continue  business  51 

Refuses  to  submit  to  examination   51 

Violates  charter,  or  law,  or  regulation  or  order  of  Super- 
intendent     51 

When  business  conducted  unsafely  51 

Capital  impaired  and  not  made  good  51 

Final  judgment  remains  unpaid  51 

Officer  refuses  to  be  examined  on  oath  51 

Payment  suspended    51 

POWERS. 

Of  banks,  enumeration  of   136 

Stockholders'  agent    76 

Trust  companies    236 

Banks  may  acquire   246 

Other  corporations  may  acquire 241,  242 

PREFERENCES. 

By  insolvent  bank,  void 190 

PREMIUM  ON  BONDS. 

Of  officers  to  be  paid  by  bank  154 

Superintendent,  paid  as  expense  of  Department 12 

Assistant  Superintendent  and  examiners,  paid  as  expense  of  de- 
partment       17 

PRESIDENT. 

Must  be  director   153 

PRESUMPTION. 

Against  officers    205 

Check,  drawing,  without  funds,  presumed  fraudulent  226 

Insolvency   presumed    fraudulent    220 

PRINCIPAL  OFFICE. 

Changed  only  by  unanimous  vote  of  stockholders   90 


170  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

PRIORITIES  IN  PAYING  DEBTS. 

Of  insolvent  bank   69 

PRIVATE  BANK. 

Becoming  incorporated,  transfer  of  assets  105 

Converted  into  State  bank,  how  104 

Effect  of  incorporation  of  105 

Incorporated,  suits  against,  not  abate  106 

Still  liable  to  suit  106 

Incorporation  of,  not  affect  creditors  or  depositors 106 

Must  advertise  as  such 4 

Not  use  name  importing  corporation  4 

Not  advertising  as  such,  a  misdemeanor  227 

Not  included  in  term  "bank"  ' 1 

Not  required  to  change  its  name  4 

Not  supervised  by  Superintendent  4 

Using  unauthorized  name,  a  misdemeanor  227 

PROFITS. 

How  calculated  before  paying  dividend  176 

Increase  of  capital  from  surplus  and  96 

What  to  be  deducted  from,  before  dividends  declared  176 

PROFITS  UNDIVIDED. 

Definition  of  6 

PROOF  OF  CLAIMS. 

Against  bank  in  hands  of  Superintendent 63 

PROPERTY  OF  BANK  IN  POSSESSION   OF  SUPERIN- 
TENDENT. 

How  sold 57 

PROPERTY. 

Real  and  personal,  power  of  bank  to  purchase,  hold  and  sell  . .  136 

PUBLICATION. 

Notice  of  consolidation  or  merger  113 

Voluntary   dissolution    119 

Of  application  for  acquisition  of  trust  company  powers  248 

Amendment  of  charter   91 

Certificate  of    94 

Charter   80 

Certificate  of    83 

Renewal  of  charter 99 

Certificate   of    102 

Trust  company  charter  234 

Reports  by  banks 40 

PUNISHMENT  FOR  MISDEMEANORS   230 

PURCHASE. 

Its  own  obligations  at  less  than  par,  bank  may  not  170 

Stock,  bank  can  not,  except  to  prevent  loss  165 


INDEX  TO  STATUTES.  171 

[References  Are  to  Sections.] 

PURCHASER  OF  STOCK. 

Sold  to  pay  assessment  gets  good  title 50 

PURCHASING  BANK'S   OBLIGATIONS. 

At  a  discount,  a  misdemeanor 215 

PURCHASING  SHARES  WITH  CAPITAL. 

A    misdemeanor    216 

Q. 

QUALIFICATIONS. 

Of  Assistant  Superintendent  and  examiner  16 

Of   directors 146 

Of   Superintendent    » 10 

QUORUM  OF  BOARD  OF  DIRECTORS  148 

R. 

RAISED  OR  FORGED  CHECKS. 

Liability  of  bank  paying 188 

RATE  OF  INTEREST. 

Not  to  exceed  8  per  cent 163 

REAL  ESTATE. 

Limit  of  loans  on  159 

Loans  and  titles,  trust  company  may  guarantee  236 

Power  of  trust  company  to  buy  and  sell 236 

Purchased  to  prevent  loss,  sale  of  168 

Purposes  for  which  may  purchase  and  hold 168 

Taxation,  when  owned  by  bank 278 

RECEIVING  COMMISSIONS  ON  LOANS. 

A  misdemeanor   209 

RECEIVING   DEPOSITS   AFTER   INSOLVENCY. 

A    felony    221 

RECEIVER  OF  BANK. 

Suit  for,  only  by  Superintendent  132 

RECOMMENDATIONS   BY    SUPERINTENDENT. 

Must  be  submitted  to  directors  46 

RECORD  OF  FEES  AND  EXPENSES. 

Superintendent  shall  keep   26 

RECORD  OF  INCORPORATION  PROCEEDINGS 84 

REDISCOUNTS. 

Not  included  in  limit  of  bank's  liability 169 

REFUSING  TO  MAKE  STATEMENTS  OR  REPORTS. 

A    misdemeanor    203 

REGISTRAR   OF   STOCKS   AND    BONDS. 

National  bank  may  act  as  252 


172  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

REGULATION  OF  DEPARTMENT. 

Violation  of,  possession  may  be  taken  51 

REMOVAL  FROM  OFFICE. 

Assistant  Superintendent    16 

For   neglect  of   duty,   misconduct,   or   corruption,   of    Superin- 
tendent, examiner  or  clerk   196 

Officer  or  employee  by  Superintendent 47 

Superintendent,  Assistant,  acts    9 

By   Governor    10 

RENEWAL  OF  CHARTER. 

Application,  referred  to  Superintendent  100 

Certificate    of    publication    102 

To  be  published    99 

Certificate  of,  to  be  issued  and  recorded  103 

Examination  and  certificate  of  Superintendent   101 

Fee  for  98 

Method  of 98 

Right    of    136 

"  Secretary  of  State  grants -. 98 

Stockholders   must  authorize    .- 98 

REPORT  OF  CONDITION. 

False,   a    felony    195 

Verifying,  a  felony 200 

REPORT  OF  DIRECTORS. 

Action   on    151 

Examination  of  bank  must  be  spread  on  minutes  149 

REPORT  OF  DIVIDENDS. 

How  certified   43 

REPORT  OF  EXAMINATION. 

By  directors,  what  to  contain   150 

Action   on    151 

To  be  in  writing 33 

REPORT   OF   SUPERINTENDENT. 

Contain  summary  of  condition  of  banks  38 

Made  to  Governor 21 

Mailed  to  banks  23 

Prima  facie   evidence    „ 26 

Publication  of 23 

To  show  banks  in  liquidation  78 

What  to  contain ." 22 

When  to  be  made 21 

REPORTS  BY  BANKS. 

Burned  after  five  years   25 

Calls  for,  mailed  to  banks  42 

Contents  of   40 


INDEX  TO  STATUTES.  173 
[References  Are  to  Sections.] 

REPORTS  BY  BANKS— Continued. 

Failure  to  make,  penalty   44 

Filed  in  Superintendent's  office   25 

Furnish    Superintendent    40 

In  voluntary  liquidation   120 

Of    condition    40 

Publication   of    40 

Refusing  to  make,  a  misdemeanor   203 

Special,  may  be  called  for  41 

REPORTS  OF  DIVIDENDS. 

Made  to  Superintendent  43 

REPORTS  OF  EXAMINERS. 

Prima  facie   evidence    26 

REPORTS  OF  EXAMINATIONS. 

Contents  of   33 

Filed  in  Superintendent's  office 25 

Prima  facie  evidence 39 

RESERVE. 

Amount  required  171 

Failure  to  make  good,  bank  insolvent  5 

Not  maintained,   effect    172 

What  to  consist  of    171 

RESERVE  BANK,  STATE. 

Bank  may  purchase  stock  in    167 

RESERVE  SYSTEM,  FEDERAL. 

Banks  may  become  members  of   182 

RESIDENCE  OF  SUPERINTENDENT  14 

RESIGNATION  OF  SUPERINTENDENT. 

Assistant  acts  9 

RESUME  BUSINESS. 

After  possession  taken,  bank  may,  when   56 

Superintendent  may  permit  bank  to  5] 

RULES  AND  REGULATIONS. 

Superintendent  may  make  24 

RULES  GOVERNING  SAVINGS  DEPOSITS  191 

S. 
SALARIES. 

Agents  appointed  to  liquidate  bank 59 

Assistant  Superintendent    18 

Clerks  of  department    18 

Examiners    18 

Officers  of  department,  how  paid   20 

Superintendent 11 

How    paid    11 


174  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

SALE  OF  STOCK. 

Purchased  by  bank  to  prevent  loss   165 

To  pay  assessment  to  restore  impaired  capital 50 

Installment    87 

Cumulative  of  other  remedies   87 

SAVINGS  BANKS. 

May  purchase  corporate  stocks,  bonds,  etc.,  166, 167 

And  hold  real  estate 168 

Reserve   required   of    171 

SAVINGS  DEPOSITS. 

Rules  and  regulations  governing  191 

SCHEDULE  OF  FEES  FOR  EXAMINATION  34 

SEAL  OF  BANK. 

Power  to  adopt  and  to  alter  at  pleasure  136 

SEAL  OF  BANKING  DEPARTMENT. 

Paper  under,  as  evidence  15 

Provided  for 15 

SECRETARY  OF  STATE. 

Amendments  to  charters,  applications  for,  file  with 90 

Certifies  copy  of  to  the  applicants  91 

Transmits  copy  to  Superintendent  of  Banks  92 

Charter  of  bank  filed  in  office  of  79 

Certifies  copy  to  applicants   80 

Transmits  copy  to  Superintendent  of  Banks  81 

Grants  renewal  of  charter  98 

Issues  certificate  of  amendment  of  charter  and  records  95 

Incorporation 84 

May  grant  trust  company  powers  to  banks 247 

Order  dissolving  bank  by    128 

Surrender  of  charter  to  123 

SECURED. 

All  loans  to  officers  or  employees  must  be  156 

SECURITY. 

Bank  can  not  take  its  own  stock  as 165 

Power  of  bank  to  take  136 

SELL  PROPERTY  OF  BANK. 

Where  possession  taken,  Superintendent  may,  how   57 

SHARES  OF  STOCK. 

Application  for  charter  must  show  number  of 79 

Purchasing  with  capital,  a  misdemeanor   216 

SLANDER   OF  BANK. 

A    misdemeanor    225 


INDEX  TO  STATUTES.  175 

[References  Are  to  Sections.] 

SOLICITOR  GENERAL. 

Advise    Superintendent    29 

Fees  of,  for  representing  Superintendent  28 

Represent    Superintendent     28 

SOLVENCY  OF  BANK. 

False  statement  as  to,  a  misdemeanor   224,  225 

SPECIAL  CHARTER. 

How  amended    89 

SPECIAL  DEPOSITS. 

Power  of  bank  to  receive   136 

SPECIAL   EXAMINATION. 

Fees    for    34 

Superintendent  may  make   31 

SPECIAL  EXAMINERS. 

Superintendent  may  appoint   24 

SPECIAL  REPORTS. 

May  be  called  for   41 

STATE  BONDS. 

Bank  may  purchase   167 

Loans  secured  by,  no  limit  to  amount  of  157 

STATE  DEPOSITORIES. 

Appointed  for  four  years  261 

Appointment  of,  not  affect  Treasurer's  bond  273 

Bond  to  protect  county  funds 275 

Bonds  deposited  by,  may  be  sold  when 269 

Of 263,  267,  276 

May  be  deposited  as  security  for  deposits  267 

Ceasing  to  act,  Governor  to  appoint  others  264 

Contract  for  payment  of  interest   262 

County  treasurers  may  deposit  in  275 

Deposits  in,  limited  to  amount  of  bond  267 

By  tax  collectors  with   270,  271 

Governor  appoints    255 

May  remove    261 

To  designate  counties  whose  collectors  deposit  therein,  re- 
spectively      271 

Interest  on  county   funds    277 

List  of  places  in  which  located  255 

Monthly  statement  to  Governor  and  Treasurer  268,  270 

National  banks  may  be  appointed  264 

Officer  receiving  commission  for  depositing  in,  guilty  of  felony  262 

Paid  no  salary  or  fees  261 

Refusing  to  pay  interest,  removed   262 

Required  to  strengthen  bond  when  265 

Sureties  on  bond,  how  relieved  266 

Treasurer  to  keep  Governor  advised  as  to  financial  condition  of  265 


176  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

STATE  TREASURER. 

Bond  not  affected  by  creation  of  State  depositories    273 

Deposits  only  in  State  Depositories  272 

Delivery  of  property  and  funds  to  Superintendent  231 

STATE  TREASURY. 

Tax  collectors  may  deposit  in    272 

STATEMENT  OF  AMOUNTS  COLLECTED. 

Superintendent's  report  to  contain   22 

STATEMENT  OF  CONDITION. 

False,   verifying,   a   felony    200 

STATEMENT  OF  EXPENSES  OF   EXAMINERS. 

Must  be  itemized  and   filed    19 

STATEMENTS  FILED  MONTHLY  TO  GOVERNOR  AND 
TREASURER. 

By  State  depositories  268,  270 

STATEMENTS  OR  REPORTS. 

Refusing  to  make,  a  misdemeanor   203 

STOCK. 

Amount  of,  and  number  of  shares,  application  for,  charter  must 

show  79 

Bank  can  not  lend  on  its  own 165 

Purchase  its  own,  except  to  prevent  loss  165 

Capital  stock,  see  Capital. 

Falsely  representing,  a  felony   206 

Liability  after  transfer  of 139 

Lien  on,  for  unpaid  installments    88 

No  lien  on,  except  for  unpaid  installments  88 

Not  sold  for  less  than  par  and  for  cash 97 

On  consolidation  or  merger,  surrender  of  old  and  issue  of  new  114 

Pledgee  of,  must  be  notified  of  assessment  on  50 

Power  of  bank  to  increase  or  decrease 136 

Sale  of,  to  pay  assessment  or  restore  impaired  capital 50 

Sold  to  pay  installment  thereon  87 

Subscribed,  organizing  before,  liability  for  142 

Transfer,  foreign  administrator  or  executor  may,  how  279 

STOCK  CERTIFICATE. 

Cancelled  where  stock  sold  to  pay  assessment  50 

STOCK  AND  BONDS. 

Bank  can  not  invest  in 166, 167 

Trust  company  may  deal  in  236 

STOCK  IN  FEDERAL  RESERVE  BANK. 

Bank   may   purchase    167 

STOCK  IN  STATE  RESERVE  BANK. 

Bank   may   purchase    167 


INDEX  TO  STATUTES.  177 

[References  Are  to  Sections.] 

STOCK   OF   CORPORATION. 

Limit* of  loans  secured  by  161 

STOCK  OF  COTTON  CORPORATION. 

Bank  may  subscribe   for    167 

STOCKHOLDERS. 

Agent,  see  Stockholders'  Agent. 

Assessment  of,  to  pay  depositors   70 

To  restore  impaired  capital  49 

Decide  whether  Superintendent  continue  in  charge  of  bank  after 

creditors    paid    75 

Distribution  of  assets  to,  on  voluntary  liquidation 122 

Elect  board  of  directors  145 

Failing  to  give  pledgee  notice  of  stock  assessment,  a  misde- 
meanor      228 

Increase  of  capital  offered  to 97 

Insolvent,  transf errer  liable  when    140 

Liability  enforced  only  by  Superintendent   143 

Is  asset  of  bank 143 

Not  affected  by  surrender  or  forfeiture  of  charter 144 

Of,  after  transfer  of  stock 139 

Of,  to  depositors  137 

List  of,  kept  on  file  at  office 189 

To  be  sent  to  Superintendent  189 

May  contest  his  liability  to  assessment,  how  70 

Be  sued  to  pay  assessment  to  restore  capital  50 

Surrender    charter    123 

Meeting  of,  to  be  called  when  creditors  paid  75 

To  make  assessment  to  restore  impaired  capital  49 

Must  authorize  amendment  of  charter  90 

Authorize  renewal  of  charter 98 

Notify  pledgee  of  assessment  to  restore  capital  50 

Ratify  consolidation  or  merger    112 

Primarily  liable  whose  name  appears  as  such  140 

Reimbursed  for  assessment  out  of  debts  70 

Two-thirds  vote  may  liquidate  bank   117 

STOCKHOLDERS'  AGENT. 

Bond  of    76 

Election  of    76 

Powers  and  duties  of  76 

Successor  of,   how  chosen    77 

SUBSCRIBERS  TO   STOCK. 

Names,  residence  and  number  of  shares  to  be   furnished   Su- 
perintendent       82 

SUCCESSOR  TO  STOCKHOLDERS'  AGENT. 

How  chosen    77 

12 


178  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

SUE  AND  BE  SUED. 

Right  of  bank  to   "...  136 

SUITS. 

Against  bank  not  abate  on  consolidation  or  merger 116 

National  bank  not  abate  by  its  conversion  into  State  bank. .  110 

Private  bank,  not  able  when  incorporated 106 

By  or  against  Superintendent,  solicitors  general  to  represent  . .  28 

Costs,  how  paid   28 

For  forfeiture  of  charter  or  liquidation,  only  by  Superintendent  132 

On  bond  of  Superintendent  or  examiners   27 

On  rejected  claim  or  deposit,  when  and  where  brought 65 

To  collect  assessment  to  restore  impaired  capital 50 

SUPERINTENDENT. 

Accepting  loan,  gratuity  or  employment   from  bank,  guilty  of 

misdemeanor   198 

Annual  report  of  120 

Application  for  amendment  of  charter  referred  to  92 

Application  for  charter  referred  to 81 

Information    furnished    82 

Renewal  of  charter  referred  to 100 

Appointed  by  Governor   8 

Appoints   assistant    16 

Clerks 16 

Examiners    16 

Special   24 

Approval  of  voluntary  liquidation  required   118 

Assesses  stockholders    70 

Assistant,  see  Assistant  Superintendent. 

Attorney  and  Solicitors  General  to  advise  29 

Audits  traveling  expenses  of  examiners  19 

Blanks,  must  supply  24 

Bond  of    12 

Capital  stock,  payment  in  installments,  approval  of  85 

May  inforce  payment  of    87 

Call  for  reports  by  40 

Mailed  to  banks    42 

Special    41 

Chief  officer  of  department    8 

Claims,  against  banks,  objections  to,  hears,  when  66 

Clerks,  expenses  of,  payable  by  Superintendent  20 

Completes  liquidation  at  request  of  stockholders   75 

Declares  and  pays  liquidation  dividends   71 

Defines  duties  of  assistant  and  examiners  16 

Deposits  funds  of  insolvent  bank    72 

Unclaimed  liquidation  dividends  and  deposits  for  creditors  74 

Disclosing  condition  of  a  bank,  guilty  of  a  misdemeanor  194 

Disclose  information  obtained  from  examination,  must  not 38 


INDEX  TO  STATUTES.  179 

[References  Are  to  Sections.] 

SUPERINTENDENT— Continued. 

Dividends  declared  must  be  reported  to   173 

Engage  in  banking,  must  not 10 

Enjoined,    how    58 

Examination  and  certificate  on  surrender  of  charter  126 

Examines  and  approves  amendment  to  charter  93 

Private  bank  applying  for  charter  as  State  bank 104 

Expenses,  traveling,  of  department,  payable  by 20 

Fixes  compensation  of  agents,  attorneys  and  accountants  73 

Forms,   shall   prescribe    25 

Gives  notice  to  prove  claims  against  bank  in  his  hands 63 

Giving  notice  of  examination,  guilty  of  misdemeanor  193 

Governor,  removes,  when  10 

Grounds   of   removal   of    10-13 

Issues  permit  to  begin  business    86 

Liable  on  bond  for  non-performance  of  duty 27 

List  of  officers   sent  to    153 

Stockholders  to  be  sent  to  189 

Mails  copy  of  call  for  reports  to  banks  42 

Making  false  report  of  examination  of  a  bank,  guilty  of  a  felony  195 

Mandamus  against    133 

Exceptions    135 

Trial   of    134 

May  appoint  agent  to  liquidate  bank   59 

Attorneys,    accountants    and    assistants    in    liquidating 

bank  60 

Special    examiners    24 

Authorize  bank  to  borrow  in  excess  of  limit  to  meet  emer- 
gency      169 

Call  for  special  reports  41 

On  applicants  for  charter  for  information   82 

Enforce    stockholders'    liability    143 

Have  warrant  to  arrest  violators  of  laws  issued   229 

Institute  suit  for  forfeifure  of  charter  or  liquidation  of  bank  132 

Issue  execution  for  fees   35 

For  penalty   44 

Make  rules  and  regulations    24 

Order  assessment  to  restore  impaired  capital 49 

Directors  to  make  examination   152 

Discontinuance  of  illegal  practice  45 

Excess  loan  reduced  to  legal  limit 157 

Items  charged  off  152 

Special  examination  of  bank   31 

Permit  bank  to  resume  business    51-56 

Require  bank  to  make  good  reserve  172 

Reject  claims  against  bank  in  his  hands  65 

Remove  officer  or  employee  of  bank 47 


182  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

SWEARING   FALSELY    ON   EXAMINATION. 

A    felony    201 

SYNDICATE  UNDERWRITINGS. 

Trust  companies  may  engage  in  167 

T. 
TAX  COLLECTORS. 

Depositing  with  State  depository   270,  271 

May  deposit  in  State  Treasury  272 

TAXATION   OF   BANKS    278 

Of  branch  banks   3 

TAXES,  RANK  OF. 

In  paying  debts  of  insolvent  bank 69 

TEMPORARY   EMERGENCY. 

Bank  may  be  authorized  to  borrow  in  excess  of  limit  to  meet. . .       169 

TIME  CERTIFICATES. 

Holders  of  depositors   2 

TIME  OF  REGULAR  EXAMINATIONS. 

Kept  secret   37 

TRANSFER. 

After  or  in  contemplation  of  insolvency  190 

TRANSFER  OF  ASSETS. 

After  notice  posted  or  possession  taken,  void 53 

TRANSFER  OF  STOCK. 

By  foreign  administrator  or  executor 279 

Failure  within  six  months,  stockholder  liable 140 

Stockholders'  liability  after  139 

TRANSFER  OF  SURPLUS. 

To  restore  impaired  capital  48 

TRANSFERS   TO   HINDER,   DELAY   OR   DEFRAUD. 

By  insolvent  bank,  a  misdemeanor  222 

TRAVELING  EXPENSES. 

Of  Superintendent,  assistant,  and  examiners  19 

TREASURER,  STATE. 

To   advise   Governor   as   to   financial   condition   of    State   de- 
positories        265 

TRUST  COMPANIES. 

Amount  of  capital  required  237 

Application  for  charter,  publication  of    234 

Banks,  included  in  term   1 

Board  of  trustees  of,  election  of  238 

By-laws   of    239 

Certificate  of  incorporation  235 


INDEX  TO  STATUTES.  183 

[References  Are  to  Sections.] 

TRUST  COMPANIES— Continued. 

Fee  for  granting  charter  233 

Governed  by  board  of  trustees  238 

How    incorporated    233 

Increase  of  capital  of   240 

May  acquire  banking  powers   237 

May  purchase  corporate  stocks,  bonds,  etc 166, 167 

Not  to  receive  deposits  237 

Officers  of   239 

Powers  of   236 

TRUST  COMPANY  POWERS. 

Banks  may  acquire  246 

National  bank  may  exercise  252 

Other  corporations  may  acquire   241,  242 

How 243 

TRUST. 

Payment  of  deposits  in 187 

TRUST  RECEIPT  OF  BANK. 

Lien  against  bank  for  collections  on  collateral  covered  by 177 

TRUSTEE. 

Deposits  by,  payment  of    186 

National  bank  may  act  as,  or  other  fiduciary 252 

Under  bonds  or  mortgages,  trust  company  may  act  as 236 

TRUSTEES  AND  OTHER  FIDUCIARIES. 

Not  individually  liable  on  stock   138 

TRUSTEES. 

Board  of,  for  trust  company  238 

Directors  of  bank  with  trust  powers  act  as  251 

TRUSTS  OF  ALL  KINDS.  „ 

Trust  company  may  execute  236 

U. 

UNAUTHORIZED   INVESTMENTS. 

Corporate  stocks,  merchandise  or  products  are  166, 167 

UNDIVIDED   PROFITS. 

Ascertained,  how    176 

Capital    increased    from    96 

Definition  of  6 

UNITED  STATES  BOND. 

Bank  may  purchase . . .' 167 

Loans  secured  by,  no  limit  to  amount 157 

UNITED  STATES. 

Rank  of  debts  to  .                                                                69 


184  INDEX  TO  STATUTES. 

[References  Are  to  Sections.] 

USING  BANK'S  FUNDS. 

Officer  or   employee  without  approval  of   directors,   a   misde- 
meanor           213 

USING  CAPITAL. 

To  purchase  shares  of  stock,  a  misdemeanor  216 

V. 

VACANCY  IN  OFFICE  OF  SUPERINTENDENT. 

How  filled  9 

VALIDATED  BONDS. 

Of  counties,  districts  and  municipalities,  bank  may  purchase  . .       167 
Loans  secured  by,  no  limit  to  amount  of  157 

VERIFICATION  OF  REPORTS. 

By  banks    40 

VIOLATING  CHARTER. 

Felony  204 

Presumption  against  officer  or  director  205 

VIOLATION  OF  BANKING  ACT. 

Wilful,   a   misdemeanor    223 

VIOLATION  OF  CHARTER. 

Law,  regulation  or  order,  possession  may  be  taken  for 51 

VIOLATION  OF  LAW  OR  ORDERS. 

Officers  or  employees  may  be  removed  for  47 

Orders  to  discontinue   45 

VIOLATION  OF  LAWS. 

To  be  submitted  to  grand  juries  by  Superintendent  229 

VOLUNTARY  ASSOCIATION. 

Banks  not  included  in  term 1 

VOLUNTARY   DISSOLUTION   OF  BANK    128 

VOLUNTARY  LIQUIDATION. 

Accomplished  how    117 

Assets  distributed  to  stockholders  122 

Fees  for  examination    34 

Notice  of,  to  be  published  119 

Superintendent's  approval  of,  necessary  118 

Unpaid  deposits  and  claims,  deposit  of  funds  to  cover 121 

VOUCHERS. 

Must  be  filed  with  expense  accounts  of  examiners  , 19 

W. 
WARRANTS. 

Superintendent  mav  have  issued  to  arrest  violators  of  law 229 

WILFUL  VIOLATION   OF  BANKING  ACT. 

A  misdemeanor   223 

WITHDRAWAL  OF  CAPITAL. 

A  misdemeanor   217 

WRITTEN  REPORTS  OF  EXAMINATION  .  33 


PART  II. 

Digest  of  Decisions  of  the  Supreme  Court  and 
the  Court  of  Appeals  of  Georgia  on 
Banks  and  Banking. 


Digest  of  Decisions 
of  the 

Supreme  Court  and  Court  of  Appeals 
of  Georgia 

On  Banks  and  Banking 


Accountant    and    General 
Manager. 

Accountant  and  general  man- 
ager of  bank  not  presumed  to 
have  authority  or  be  charged 
with  duty  of  discounting  pa- 
pers for  the  bank.  110/494 
(35  S.  E.  780). 

Advances. 

Agreement  to  advance  money 
to  cover  margins  in  cotton 
futures,  on  deposit  of  collat- 
erals, not  enforced.  102/808 
(30  S.  E.  267). 

Contract  between  bank  and 
manufacturer  whereby  bank 
agreed  to  advance  him  certain 
sum,  manufacturer  not  being 
bound  to  take  whole  or  any 
part  unless  it  was  necessary  in 
conducting  his  business,  was 
unilateral,  there  being  no  bind- 
ing obligation  to  borrow  any 
definite  sum.  121/714  (49  S. 
E.  673). 

Advances  made  by  bank  to 
cotton  buyer  under  agreement 
that  bank  to  have  title  to  goods 
until  reimbursed  by  payment  of 
drafts  drawn  by  buyer  upon  his 
customers,  held  that  where  pur- 
chase made  and  goods  deliv- 
ered to  buyer  himself,  bank 
paying  price  thereof  on  his 
check  without  having  obtained 


185 


actual  or  constructive  posses- 
sion of  goods,  title  passed  to 
buyer.  101/345  (2)  (28  S.  E. 
863). 

Attachment. 
See  Bill  of  Lading. 

Attorney. 

Attorney  for  bank  whose 
duties  were  to  act  as  general 
adviser  of  bank's  officers  and  to 
collect  overdue  claims  had  no 
authority  to  make  sale  of  land 
belonging  to  bank.  Nor  could 
cashier  or  director  ratify  such 
sale.  108/376  (33  S.  E.  1003). 

Answer  to  action  on  note 
that  plaintiff's  attorney  was  di- 
rector of  plaintiff  bank  and  in- 
terfered with  defendants'  ef- 
forts to  meet  their  indebtedness 
to  bank  was  demurrable,  in  ab- 
sence of  showing  that  attorney 
was  acting  within  scope  of  his 
employment  or  authority  from 
bank.  141/565,  566  (4)  (81 
S.  E.  886). 

See  Cashier. 

Bank  Notes. 

Statutes  passed  for  protec- 
tion of  bank  notes  liberally  con- 
strued. 18/66  (6). 

While  bank  notes  occupy  for 
some  purposes  the  position  of 


186 


PARK'S  BANKING  LAW  OF  GEORGIA. 


securities,  yet,  in  addition  they 
are  considered  as  and  subserve 
the  purposes  of  money.  13/ 
298. 

Loser  of  bank  notes  can  re- 
quire payment  by  bank  upon 
offering  suitable  indemnity. 
18/67  (17);  see  R.  M.  Charl. 
193. 

Setting  apart  of  bank  bills  as 
a  pledge  was  not  an  issuing  of 
such  bills  as  circulating  cur- 
rency. 1/435. 

Circulation  of  bank  notes 
when  below  par  not  illegal; 
holder  may  collect  in  full 
though  he  obtained  notes  at  a 
discount.  26/17  (1,  2). 

Statute  of  limitations  does 
not  apply  to  bank  bills.  13/ 
288  (4);  see  49/419  (2). 

In  suit  against  assignee  upon 
bills  of  the  bank,  where  there 
is  no  plea  of  non  est  factum,  it 
is  not  necessary  to  prove  the 
execution  of  the  bills.  30/77C 
(1). 

In  suit  on  bank  notes,  it  is 
not  necessary  to  describe  them 
by  numbers  and  letters.  7/79. 

Nor  is  it  necessary  to  aver 
and  prove  a  demand.  8/469. 

But  where  a  bank  note  is 
payable  on  demand  at  a  par- 
ticular time  and  place,  demand 
must  be  averred  and  proved. 
13/287. 

Where  issued  and  circulated, 
paid  in  capital  stock  must  be 
first  applied  to  payment  of  bank 
notes.  24/273  (1). 

Directors  issuing  notes  be- 
fore required  amount  of  capi- 
tal stock  paid  in,  if  bank  be- 
came insolvent,  bill  holders  and 
creditors  might  proceed  at  once 
against  stockholders  and  di- 
rectors. 24/273  (2). 


Bill  of  Lading. 

Where  goods  shipped  upon 
bill  of  lading  attached  to  draft, 
delivery  of  goods  without  pay- 
ment of  draft  was  conversion 
subjecting  bank  to  action  of 
trover.  98/576  (25  S.  E.  584). 

Where  consignor  deposited 
with  bank  bill  of  lading  attached 
to  draft  on  consignee  and  amount 
was  entered  to  his  credit  under 
circumstances  entitling  him  to 
draw  upon  bank  at  once  for 
proceeds,  jury  could  infer  that 
intention  was  to  make  equitable 
assignment  from  consignor  to 
bank  of  fund  representing  pur- 
chase price  of  goods.  91/307 
(18S.  E.  188). 

Draft  and  attached  bill  of 
lading  endorsed  in  blank  and 
deposited,  amount  being  cred- 
ited to  depositor  and  drawn 
against  by  him,  became  prop- 
erty of  bank,  and  the  bank's 
title  to  the  goods  sold  is  su- 
perior to  subsequent  lien 
against  seller.  136/372  (71  S. 
E.  660). 

Bank  not  liable  as  joint  ven- 
dor with  consignor  who 
shipped  goods  and  drew  draft 
with  bill  of  lading  attached  in- 
dorsing it  in  blank  and  deliver- 
ing it  with  draft  to  bank,  in- 
dorsing draft  for  deposit  to  his 
own  credit.  89/108  (2)  (14 
S.  E.  891). 

No  such  relation  between 
consignee  of  goods  and  bank 
arises  simply  upon  the  pur- 
chase by  the  bank  of  a  draft 
and  bill  of  lading  as  will  entitle 
consignee  to  recover  of  bank 
for  a  breach  of  duty  imposed 

by  law  upon  the  seller.  

App.  -  -  (101  S.  E.  6). 

Where  sellers  drew  draft  on 
buyers,  with  bill  of  lading  at- 


DIGEST  OF  DECISIONS. 


187 


tached,  and  it  was  deposited  to 
their  credit,  and  they  drew 
checks  against  same,  title  to 
goods  and  to  proceeds  of  draft 
vested  in  bank.  15  App.  319 
(5). 

Proceeds  of  draft  attached  to 
bill  of  lading  not  subject  to  at- 
tachment taken  out  by  drawee 
of  draft  against  drawer  after 
collection  by  bank  which  had 
purchased  same.  142/265  (1) 
(82  S.  E.  658). 

Evidence  here  held  not  in 
conflict  with  positive  testimony 
that  draft  had  been  sold  at  dis- 
count to  bank  in  which  it  was 
deposited  and  that  proceeds 
were  deposited  to  drawer's 
credit.  142/265  (2)  (82  S.  E. 
658). 

Indorsement  by  bank  guar- 
anteeing all  previous  indorse- 
ments of  draft  has  no  reference 
to  bill  of  lading  attached  and 
bank  not  liable  to  drawee  upon 
payment  of  draft  where  bill  of 
lading  was  forged.  20  App. 
242  (92  S.  E.  968). 

Bills  of  Exchange. 
See  Checks. 

Bond. 

Where  bank  authorized  to 
appoint  necessary  officers  and 
make  by-laws  and  rules,  and 
by-laws  provided  that  every  of- 
ficer should  perform  such 
duties  as  should  be  required  of 
him,  and  where  book-keeper 
gave  bond  to  faithfully  per- 
form all  duties  of  his  office  and 
all  other  duties  required  of 
him,  held  that  such  bond  was 
authorized  by  charter,  and  that 
where  book-keeper  in  discharge 
of  "other  duties"  in  the  bank 
took  money  therefrom,  the 


sureties  were  liable.  R.  M. 
Charl.  29. 

Bank  teller  could  be  appoint- 
ed assistant  cashier  without  no- 
tice to  surety  company,  under 
terms  of  bond  in  this  case.  97 / 
634  (1)  (25  S.  E.  392). 

Notice  of  employee's  default 
required,  but  no  duty  of  super- 
vising his  conduct  imposed, 
knowledge  of  co-employee  not 
imputable  to  bank.  97/635 
(2)  (25  S.  E.  392). 

Plea  alleging  knowledge,  but 
not  alleging  failure  to  notify, 
stricken.  97/635  (3)  (25  S. 
E.  392). 

Building  and  Loan  Asso- 
ciation. 
See  Savings  Bank. 

By-Law  Lien. 
See  Stock. 

Capital  Stock. 

Where  single  amount  is 
named  in  charter,  it  is  both  the 
maximum  and  the  minimum 
amount.  148/764  (98  S.  E. 
466). 

Organizers  transacting  busi- 
ness before  minimum  capital 
stock  paid  in,  liable  to  creditors. 
148/764  (98S.  E.  466). 

Banks  can  not  use  any  part 
of  their  capital  stock  in  order 
to  purchase  their  own  shares : 
discussion  of  the  law  and  its 
history.  133/332  (2),  337  (65 
S.  E.  859)  and  citations. 

See  Insolvency. 

Cashier. 

Authority  of. 

The  cashier  is  the  receiving 
officer  and  agent  of  the  bank. 
7/196. 

Cashier  may  do,  independ- 
ently of  directors,  whatever 


188 


PARK'S  BANKING  LAW  OF  GEORGIA. 


properly  appertains  to  his  of- 
fice; one  of  the  acts  which 
properly  appertains  to  his  of- 
fice is  to  pay  debts  of  bank  by 
transfer  of  negotiable  securi- 
ties. 10/10  (4). 

Usually  question  of  discount- 
ing paper  comes  before  direct- 
ors, and  cashier  is  only  execu- 
tive officer  to  carry  out  their 
decision;  but,  beyond  his  in- 
herent powers,  cashier  may  be 
authorized  to  act  for  bank  by 
the  organic  law,  by  action  of 
stockholders,  by  vote  of  the 
board,  or  by  usage  and  tacit  ap- 
proval. 109/12,  21  (34  S.  E. 
378). 

Provision  in  charter  requir- 
ing all  contracts  to  be  signed 
by  president  and  countersigned 
by  cashier  not  apply  to  such 
dealings  and  transactions  as 
are  usually  and  necessarily  per- 
formed by  cashier.  1/418;  7 / 
84. 

Charter  providing  that  con- 
tracts should  be  signed  and 
countersigned  by  president  and 
cashier,  held  that  bills  signed 
by  vice-president  and  counter- 
signed by  assistant  cashier, 
there  being  in  office  at  the  time 
a  president  and  cashier,  were 
not  binding.  31/371  (2). 

Evidence  that  cashier  fre- 
quently issued  certificates  of 
deposit,  admissible  to  show  he 
had  authority  to  do  so.  20/ 
276  (6). 

Cashier  had  no  authority  to 
ratify  unauthorized  sale  by 
bank's  attorney  of  land  belong- 
ing to  the  bank.  108/376  (33 
S.  E.  1003). 

Promise  by  cashier  without 
consideration,  to  drawer  of 
draft,  to  pay  same  out  of  funds 
of  customer  on  whom  draft 
drawn  held  not  enforceable 


against  bank,  unless  customer 
assents  that  bank  shall  make 
such  application  of  funds 
placed  to  his  credit.  121/527 
(49  S.  E.  615)  ;  23  App.  279 
(4)  (98  S.  E.  112). 

Where  bank  directors, 
chargeable  with  knowledge  of 
transaction,  acquiesced  in  cash- 
ier's acceptance  of  new  notes, 
in  satisfaction  of  note  previ- 
ously given,  they  were  estopped 
to  assert  cashier's  lack  of  au- 
thority. 15  App.  772  (3)  (84 
S.  E.  157). 

Bank  directors  are  charge- 
able with  knowledge  of  act  of 
cashier  in  accepting  new  notes 
in  satisfaction  of  note  previ- 
ously given  to  bank.  15  App. 
772  (3)  (84  S.  E.  157). 

Authority  of  cashier  to  com- 
promise or  discharge  debts  due 
bank,  without  payment  or  re- 
ceipt of  other  securities,  must 
be  shown  by  implication  or 
usage,  or  there  must  have  been 
ratification  by  bank.  15  App. 
815  (1)  (84  S.  E.  232). 

Cashier  can  not  bind  bank  by 
lending  money  to  himself, 
whatever  may  be  his  general 
authority  as  to  making  loans. 
126/702,709  (56  S.  E.  55). 

Agency  of  cashier  to  assign 
bank's  assets  in  his  custody  not 
extend  to  assets  held  as  collat- 
eral for  loan  made  to  anoi:her 
person  for  the  cashier's  benefit, 
the  collaterals  not  belonging  to 
such  other  person  but  to  the 
cashier  himself.  92/735  (2) 
(19S.  E.  38). 

Bank  paying  unauthorized 
draft  made  by  one  as  cashier  of 
another  bank,  after  he  had 
ceased  to  be  cashier,  could  as- 
sume, without  inquiry,  that  he 
acted  with  authority,  under 


DIGEST  OF  DECISIONS. 


189 


facts  here.  20  App.  236  (92  S. 
E.,953). 

Cashier  has  no  authority  to 
lend  bank's  money,  unless  au- 
thorized so  to  do  by  charter  or 
by-laws;  bank  not  liable  for 
breach  of  his  contract  to  lend 
money  without  authority  and 
in  violation  of  the  banking 
laws.  3  App.  364  (2)  (60  S. 
E.  13). 

Act  of  cashier  in  delivering 
up  to  subscriber  his  note  for 
stock  upon  transfer  of  the 
stock  to  third  person,  held  to 
have  been  ratified  by  bank.  24/ 
540,  546.  ' 

Where  cashier  performed  il- 
legal act  for  benefit  of  bank 
and  it  was  known  to  directors, 
or  would  have  been  known  to 
them  if  they  had  bestowed  or- 
dinary attention  on  affairs  of 
their  office,  and  they  did  not  re- 
pudiate it,  it  was  the  act  of  the 
bank.  20/276  (8). 

Cashier's  contract  to  lend 
money  in  violation  of  the  bank- 
ing laws  of  the  State  could  not 
be  rendered  legal  by  ratification 
or  binding  by  estoppel.  3  App. 
364  (3)  (60S.  E.  13). 

Cashier  held  not  liable  in 
damages  for  failure  to  notify 
customer  of  insolvency  of  bank. 
77/152. 

Cashier's  character  for  hon- 
esty proven  good  when  em- 
ployed, bank  can  not  rely  on 
presumption  that  he  remains 
honest.  95/394,  396  (22  S.  E. 
628). 

Dealings  With  and  By. 

Where  draft  payable  to,  and 
indorsed  by  one  as  cashier,  the 
indorsement  is  prima  facie  that 
of  the  bank.  16/458. 

Note  indorsed  to  cashier  as 
such,  bank  may  sue  thereon. 


Declaration  should  allege  that 
such  person  is  cashier  and  that 
ownership  of  note  is  in  bank. 
97/524  (1)  (25S.  E.  348). 

Suit  by  bank  on  note  payable 
to  person  as  cashier  amendable 
by  alleging  such  person  is  cash- 
ier and  that  bank  owns  note. 
102/109  (29S.  E.  144). 

Testimony  as  to  whether 
transactions  were  with  cashier 
as  such,  or  as  individual,  is  in- 
admissible. 18  App.  610  (89 
S.  E.  1095). 

Fact  that  cashier  acted  for 
bank  in  making  loan  and  also 
sold  borrower  an  automobile, 
receiving  therefor  the  proceeds 
of  the  loan,  not  render  bank  li- 
able for  breach  of  the  seller's 
warranties  where  bank  not 
shown  to  have  furthered  or 
participated  in  the  sale.  State- 
ment by  cashier  that  bank 
would  guarantee  terms  of  sel- 
ler's warranty  not  render  bank 
liable  since  such  undertaking 
would  be  ultra  vires  and  void. 
-App.  -  -  (101  S.  E.  196). 

Where  cashier,  together  with 
other  officers,  for  the  purpose 
of  concealing  the  true  financial 
condition  of  the  bank,  give 
their  individual  notes  for 
money  borrowed,  such  an  ar- 
rangement, if  known  to  the 
lender,  is  contrary  to  public 
policy,  and  the  bank  is  not  li- 
able on  the  notes  although  the 
money  realized  therefrom  was 
placed  to  its  credit  with  the 
lender.  146/799,  802  (92  S.  E. 
525). 

Borrower  for  secret  use  of 
cashier  could  not  hold  bank  li- 
able for  collaterals  belonging  to 
cashier  deposited  to  secure  the 
loan  and  abstracted  by  the 
cashier.  92/735  (1)  (19  S.  E. 
38). 


190 


PARK'S  BANKING  LAW  of  GEORGIA. 


Notice  to. 

Notice  to  cashier  is  notice  to 
bank.  6/44  (1);  17/100  (3); 
see  113/527  (2)  (38  S.  E.947). 

Bank  not  bound  by  conduct 
and  knowledge  of  cashier  in 
making  loan  for  his  own  benefit 
on  note  of  another  and  stock  as 
collateral,  such  other  person 
having  notice  of  rule  of  bank 
that  officer  could  not  become  its 
debtor.  73/223;  see  75/149; 
92/735  (1)  (19  S.  E.  38); 
110/827,848  (36S.  E.  256). 

Where  president  and  cashier 
of  bank  were  members  of  part- 
nership and,  without  knowl- 
edge of  other  member  thereof, 
executed  and  delivered  to  bank 
a  note  in  partnership  name  for 
purpose  of  raising  money  they 
had  agreed  to  put  into  partner- 
ship business,  partnership  not 
liable  on  note,  though  money  in 
fact  used  for  purpose  stated. 
Under  these  circumstances 
knowledge  of  president  and 
cashier  was  knowledge  of  bank. 
97/527  (25  S.  E.  360) ;  see  3 
App.  287  (1)  (59  S.  E.  844); 
5  App.  600  (3)  (63S.  E.  648). 

Bank  required  to  notify 
bonding  company  of  employee's 
default,  but  no  duty  of  super- 
vising his  conduct  imposed, 
knowledge  of  cashier  not  im- 
putable  to  bank.  97/634  (2) 
(25  S.  E.  392). 

Where  an  individual  has  an 
interest  in  note  which  he  knows 
was  given  without  considera- 
tion and  such  individual  as 
cashier  having  control  of  dis- 
counts of  bank  discounts  such 
note  with  funds  of  bank,  the 
latter  is  not  a  bona  fide  holder. 
109/12  (2)  (34  S.  E.  378). 

See  Deed;  Directors;  Na- 
tional Banks;  Presi- 
dent. 


Cashier's  Check. 

See  Check. 
Certificate  of  Deposit. 

See  Cashier;  Deposit;  Di- 
rector. 

Certified  Check. 
See  Check. 

Charter. 

Charters  of  banks  held  to  be 
contracts.  Each  stockholder  by 
his  acceptance  of  charter,  be- 
comes party  to  contract  and  is 
bound  by  its  provisions.  19/ 
325  (1,  2);  see  37/411;  53/ 
512. 

Charter  of  bank  granted  by 
General  Assembly,  is  public 
law,  and  courts  take  cognizance 
thereof.  31/69;  66/177;  15 
App.  520  (5)  (83  S.  E.  891); 
18  App.  402  (7)  (89  S.  E. 
625). 

From  time  that  certificate  is 
made  and  filed  to  organize 
banking  association,  every  party 
to  action  is  precluded  from  de- 
nying corporate  existence  of 
association.  16  App.  820,  821 
(86  S.  E.  644). 

Certificate  made  and  filed  to 
organize  banking  association  is 
evidence  that  statute  has  been 
complied  with  and  company 
duly  organized.  16  App.  820, 
821  (8)  (86S.  E.  644). 

Certificate  to  organize  bank- 
ing association  is  revocable  for 
fraud  in  its  procurement  only 
in  direct  proceeding  brought  by 
State.  16  App.  820,  821  (8) 
(86  S.  E.  644). 

Check. 

As  Payment. 

Check  payment,  when  itself 
paid.  58/258. 


DIGEST  OF  DECISIONS. 


191 


Bank  check  tendered  in  pay- 
ment is  not  such  until  paid. 
138/73  (1)  (74  S.  E.  770). 

Check  given  in  payment  of 
note,  holder  of  note  not  bound 
to  surrender  it  unless  there  is 
an  agreement  that  check  be  re- 
ceived as  payment.  8  App.  513 
(3)  (69S.  E.  923). 

Charging  depositor  with 
amount  of  check  by  bank  on 
which  drawn  and  to  which  sent 
for  collection,  equivalent  to 
payment.  117/772  (54  S.  E. 
47) ;  and  see  95/277  (21  S.  E. 
717). 

Where  amount  of  check  is 
charged  to  drawer's  account  by 
the  drawee  bank,  drawer  is  dis- 
charged and  bank  cashing 
check  for  payee  is  subrogated 
to  his  rights  and  has  action 
against  drawee  bank.  8  App. 
182  (2)  (68  S.  E.  872). 
Bill  of  Exchange. 

Difference  between  check  and 
bill  of  exchange.  46/487,  491 ; 
92/732  (19S.  E.  55). 

Cashier's  Check. 

Banker's  check  means  check 
drawn  by  banker  as  distin- 
guished from  check  drawn  on 
bank  by  depositor.  8  App.  714 
(3)  (70  S.  E.  151). 

Holder  of  cashier's  check 
may  sue  bank  as  maker  without 
joining  payee  or  indorser.  143/ 
293  (1)  (84S.  E.  966). 

Cashier's  check  is  primary 
obligation  of  the  bank.  143/ 
293  (1)  (84S.  E.  966). 

Holder  in  good  faith '  of 
cashier's  check  payable  to  ficti- 
tious payee  is  entitled  to  sue 
bank  as  maker  thereon.  143/ 
293  (2). 

Cashier's  check,  payable  to 
order  of  person  having  no 
knowledge  of  the  transaction 


or  interest  in  the  check,  and  not 
intended  to  be  party  to  the 
transaction,  may  be  deemed 
payable  to  fictitious  payee.-  143/ 
293  (2). 

Where  dishonored  check  de- 
clared on  is  attached  to  petition 
and  alleged  to  have  been  signed 
by  an  individual  as  cashier,  au- 
thority of  cashier  to  make 
check  is  sufficiently  alleged. 
144/120  (3)  (86S.E.  317). 

Certified  Check. 

A  certified  check  is  a  check 
drawn  by  depositor  upon  his 
funds  in  the  bank,  which  the 
proper  officer  of  the  bank  certi- 
fies will  be  paid  when  duly  pre- 
sented. 8  App.  714  (3)  (70  S. 
E.  151). 

Collection. 

Where  unauthorized  collec- 
tion of  check  ratified  by  payee's 
conduct,  bank  not  liable.  97/ 
383  (23  S.  E.  823). 

Bank  receiving  from  depos- 
itor check  upon  another  bank 
and  crediting  it  on  his  pass 
book,  not  as  cash,  but  as  a 
check,  not  held  to  be  an  abso- 
lute purchaser  of  the  check. 
95/277  (1)  (21  S.  E.  717); 
see  136/372  (71  S.  E.  660). 

Where  drawee  bank,  to  which 
check  had  been  sent  for  collec- 
tion, charged  depositor  with 
amount  thereof,  this  was 
equivalent  to  payment.  Drawee 
then  held  proceeds  as  agent  of 
payee  and  drawer  was  dis- 
charged from  liability  on  debt 
for  which  check  given.  117/ 
772  (45  S.  E.  47).  ^ 

Where  check  indorsed  to 
bank  "for  collection  and  credit 
for  deposit"  to  payee's  account, 
bank  is  payee's  agent  to  collect 
and  title  to  check  does  not  pass 


192 


PARK'S  BANKING  LAW  OF  GEORGIA. 


to  bank  in  absence  of  agree- 
ment evidenced  otherwise  than 
by  language  of  indorsement. 
Such  agency  revocable  by  payee 
at  any  time  before  collection 
and  may  be  terminated  by  in- 
structing drawee  bank  to  with- 
hold payment.  10  App.  716 
1,2  (74S.  E.  78). 

Where  owner  of  check  de- 
livers it  to  bank  for  collection 
and,  before  proceeds  remitted, 
bank  fails,  owner  not  entitled 
to  priority  over  general  credit- 
ors of  bank.  10  App.  716  (3) 
(74  S.  E.  78)  and  citations. 

Consideration. 

Check  is  a  contract  in  writ- 
ing and  not  mere  request  on 
third  party  to  pay  money ;  it 
imports  a  consideration  and 
none  need  be  alleged  in  suit  to 
collect  amount  due  thereon. 
135/865  (1)  (70  S.  E.  798). 

Check  imports  its  own  con- 
sideration in  the  sense  that  con- 
sideration will  be  presumed 
until  contrary  appears.  4  App. 
253  (3)  (61  S.  E.  138). 

As  between  immediate  par- 
ties, check  must  be  supported 
by  consideration,  in  order  to  be 
enforceable  aganist  maker.  4 
App.  253  (2)  (61  S.  E.  138). 

When  sued  by  payee,  maker 
can  show  by  parol  that  check 
is  without  consideration  or  that 
consideration  has  failed.  4 
App.  253  (2-a)  (61  S.  E.  138). 

Plea  that  check  given  by  de- 
fendant without  consideration 
but  with  understanding  that,  if 
third  person  would  turn  certain 
money  over  to  defendant  in  fu- 
ture, check  would  be  paid  out 
of  it,  and  that  money  has  never 
been  turned  over  to  defendant, 
sets  out  good  defense.  4  App. 
253  (2-a)  (61  S.  E.  138). 


Check  sued  on,  prima  facie 
case  made  by  proof  of  execution 
and  delivery,  presentment  to 
drawee,  and  refusal  to  pay.  4 
App.  253  (3)  (61  S.  E.  138). 

Declaration  setting  out  check 
and  alleging  that  it  was  given 
by  defendant  to  pay  for  goods 
delivered  by  plaintiff  to  third 
person,  and  that  check  was 
duly  presented  and  payment  re- 
fused, set  out  cause  of  action. 
4  App.  253  (1)  (61  S.  E.  138). 

Dishonor. 

Indorser  of  check  discharged 
from  liability  if  check  not  pre- 
sented with  reasonable  dili- 
gence. Drawer  not  discharged 
if  presentation  made  any  time 
before  suit  is  brought,  unless 
he  is  injured  thereby,  and  then 
only  to  extent  of  his  injury. 
1/304;  5/245;  44/406;  95/ 
376  (22  S.  E.  543)  ;  100/147 
(3)  (27  S.  E.  979)  ;  1  App. 
244  (4)  (58  S.  E.  212). 

Drawer  of  check  not  held  li- 
able if  check  dishonored  by 
reason  of  insolvency  of  drawee 
bank,  and  loss  resulted,  unless 
check  presented  within  reason- 
able time;  what  is  reasonable 
time  depends  upon  circum- 
stances. 99/585  (27  S.  E. 
147). 

In  order  to  hold  payee  of 
check  liable  for  failure  to  pre- 
sent it,  in  event  of  failure  of 
drawee,  maker  must  have  in 
bank  at  all  times  after  drawing 
check  either  funds  of  his  own 
or  some  agreement  with  bank 
which  will  guarantee  payment 
at  such  time  as  holder  may 
choose  to  present  the  check. 
And  it  must  appear  that  payee 
has  accepted  check  from  draw- 
er or  that  he  is  under  some  ob- 


DIGEST  OF  DECISIONS. 


193 


ligation  to  do  so.  1  App.  244 
(1,2)  (58  S.  E.  212). 

Issuance  of  check  includes 
two  guarantees'  on  part  of 
maker, — that  drawee  is  solvent 
and  that  check  will  be  paid  on 
presentation.  1  App.  244  (3), 
(58  S.  E.  212). 

Check  bearing  direction  of 
maker  that  it  is  payable  through 
named  bank,  drawee  not  bound 
to  pay,  unless  check  presented 
through  bank  specified.  Third 
bank  holding  check  protesting 
for  non-payment  upon  refusal 
of  drawee  to  pay,  liable  there- 
for to  drawer.  134/486  (68  S. 
E.  85). 

"Subject  to  check"  means 
subject  to  payment  without  lim- 
itation or  restriction,  except 
that  the  check  must  be  pre- 
sented on  banking  days  within 
banking  hours.  114/788  (2) 
(40  S.  E.  825). 

Refusal  of  bank  to  pay  de- 
positor's check  in  other,  funds 
than  Confederate  notes,  which 
was  all  he  had  on  deposit,  not 
such  wanton  or  fraudulent  re- 
fusal to  pay  holder  of  check  as 
would  make  bank  liable.  42/ 
244. 

Where  assignment  of  deposit 
made  after  depositor  had  given 
check  to  a  different  person 
whether  facts  warranted  pay- 
ment of  check  first,  though  as- 
signment first  presented,  was 
question  for  jury.  109/682  (34 
S.  E.-998). 

Where  check  sent  to  drawee 
bank,  drawer  having  sufficient 
funds  on  deposit  at  the  time  to 
pay  it,  and  it  was  returned  un- 
paid, this  was  a  refusal  to  pay, 
though  there  was  no  protest 
nor  wilful  dishonor  of  paper, 
but  refusal  due  to  negligent 
mistake  of  employee.  In  such 
13 


case  bank  liable  for  temperate 
damages  without  proof  of  spe- 
cial damage.  96/334  (I,  2) 
(23  S.  E.  190) ;  128/30  (2) 
(57  S.  E.  78). 

Verdict  for  $200  held  not  too 
large.  96/334  (3)  (23  S.  E. 
190). 

In  suit  to  recover  for  wrong- 
ful dishonor  of  check  evidence 
relating  to  customer's  financial 
credit  and  standing  is  allowable 
though  no  claim  made  for  spe- 
cial damages.  128/30  (1)  (57 
S.  E.  78). 

Forged  Check. 

Bank  cashing  forged  check 
not  relieved  from  liability  be- 
cause it  did  so  in  good  faith, 
believing  from  inquiry  of  per- 
son presenting  check  that  he 
was  authorized  to  sign  deposit- 
or's name.  85/293  (11  S.  E. 
616);  see  81/597  (7  S.  E. 
738);  114/683  (40  S.  E.  720); 
see  Savings  Banks. 

Where  agent  having  broad 
power  of  attorney  to  collect 
and  pay  out  money  for  princi- 
pal, and  generally  to  attend  to 
principal's  business,  deposited 
money  to  principal's  credit  and 
afterwards  drew  it  out  on 
checks  purporting  to  be  signed 
by  principal  and  believed  by  the 
bank  to  be  genuine,  held  that 
bank  was  discharged  whether 
checks  in  fact  genuine  or  not. 
57/283  (1). 

Bank  cannot  recover  from 
bona  fide  holder  for  value 
money  paid  on  check  of  de- 
positor to  which  drawer's  name 
was  forged,  unless  holder  neg- 
ligently contributed  to  fraud, 
or  conduct  tended  to  mislead 
drawee,  who  was  free  from 
fault.  17  App.  572  (1)  (87  S. 
E.  825). 


194 


PARK'S  BANKING  LAW  OF  GEORGIA. 


Payee  of  check  whose  in- 
dorsement forged  has  no  right 
of  action  against  drawee  bank 
because  bank,  supposing  in- 
dorsement genuine,  charged 
amount  of  check  to  depositor, 
credited  correspondent  from 
whom  check  received  with 
equal  amount,  and  on  discovery 
of  forgery  returned  check  to 
correspondent  and  made  entries 
on  books  cancelling  former  en- 
tries. The  check  was  neither 
paid  nor  accepted.  88/252  ( 14 
S.  E.  577). 

Post-Dated  Check. 

A  post-dated  check  cannot 
be  paid  or  certified  in  advance 
of  its  date;  drawer  does  not 
undertake  to  have  funds  in 
drawee's  hands  until  the  time 
of  its  date  arrives.  8  App.  288 
(3)  (68  S.  E.  1092). 

Revocation. 

Check  in  ordinary  form  may 
be  revoked  at  any  time  before 
bank  has  paid  it  or  committed 
itself  to  pay  it.  146/96  (90  S. 
E.  718). 

Bank  is  bound  by  notice  of 
revocation,  orally  or  in  writing, 
and  liable  to  the  drawer  to  the 
amount  thereafter  paid  on  the 
check.  146/96  (90  S.  E.  718). 

Where  debtor  turned  over  to 
another  stock  of  goods  to  be 
sold  for  benefit  of  creditors 
and  such  other  sold  them  and 
mailed  checks  to  creditors,  after 
which  he  was  garnished  by  one 
of  the  creditors,  he  was  under 
no  legal  duty  to  countermand 
the  checks,  and  could  not  coun- 
termand them  without  incur- 
ring liability  to  holders.  1  App. 
628  (57S.  E.  1074). 

Where  debtor  sends  check  by 
mail,  title  thereto  remains  in 


sender  until  received  by  cred- 
itor, unless  creditor  instructs 
debtor  to  send  check  by  mail. 
1  App.  646  (57  S.  E.  1033). 

Maker  of  check  cannot,  in 
absence  of  fraud  or  mistake, 
countermand  payment  without 
incurring  liability  to  payee  or 
bona  fide  holder  thereof.  17 
App.  482  (1)  (87S.  E.  717). 

Check,  unaccepted,  not  de- 
scribing particular  fund  or 
using  words  of  transfer  of 
whole  or  part  of  amount,  not 
an  assignment  of  money  to 
drawer's  credit.  120/714  (48 
S.  E.  122) ;  96/254  (2)  (22  S. 
E.  1001)  and  citations;  146/ 
96  (90  S.  E.  718),  (98  S.  E. 
112)  (23  Ga.  App.  279)  (3). 

See  Crimes  and  Misde- 
meanors; Savings 
Banks. 

Clearing  House. 

Component  banks  of  clear- 
ing-house entitled  to  sue  col- 
lecting bank  on  dishonored 
check  of  such  bank,  though 
such  bank  was  partnership. 
144/120  (1)  (86  S.  E.  317). 

Manager  and  cashier  of 
clearing-house  association  are 
neither  necessary  nor  proper 
parties  in  such  action.  144/120 
(2). 

See  Insolvency. 

Collateral. 

Law  giving  lien  upon  "assets 
of  bank  for  collections  on  col- 
laterals constitutional.  147/ 
273  (93  S.  E.  880). 

Return  of  collateral  pledged 
not  required  before  payment  of 
debt,  even  if  the  transfer  was 
illegal.  19  App.  435  (91  S.  E. 
509). 

Bank  is  liable  to  owner  for 


DIGEST  OF  DECISIONS. 


195 


unlawful  disposition  by  one  of 
its  officers  contrary  to  terms  of 
contract,  of  collateral  security 
held  by  it.  20  App.  39  (92  S. 
S.  E.  398). 

Collections. 

Where  bank  took  solvent  bill 
for  collection  and  was  instruct- 
ed to  allow  it  to  be  renewed,  on 
condition  that  solvent  indorser 
given,  and  where  renewal  al- 
lowed without  such  indorser, 
bank  liable  for  damages  sus- 
tained by  holder.  59/667  (1). 

Law  implies  contract  on  part 
of  bank  to  obey  instructions, 
and  on  part  of  bailor  to  pay  rea- 
sonable compensation.  59/668 
(3). 

Acceptance  by  bank  of 
amount  less  than  called  for  by 
draft  sent  for  collection,  under 
special  instructions  renders 
bank  liable  for  difference  be- 
tween amount  called  for  and 
amount  remitted.  Indebtedness 
existing  between  drawer  and 
drawee  no  defense  to  bank.  101 
S.  E.  194  (Ga.  App.). 

Bank  acting  only  as  collect- 
ing agent  not  liable  in  action 
for  money  had  and  received  for 
amount  paid  on  unauthorized 
indorsement.  20  App.  811  (93 
S.  E.  542). 

Accepted  draft  paid  by  check 
on  collecting  bank,  which  for- 
warded its  own  check  to  drawer 
and  then  failed,  drawee  not  li- 
able. 137/23  (72S.  E.  415). 

Where  drawee  has  on  gen- 
eral deposit  with  bank  sufficient 
funds  to  pay  draft  held  by  it 
for  collection  and  instructs  the 
bank  to  pay  it,  and  the  collect- 
ing bank  agrees  to  pay  it  by 
charging  same  to  his  account, 
the  transaction  constitutes  pay- 
ment of  the  draft  as  between 


the  drawer  and  drawee,  and 
the  drawee  is  not  liable  if  the 
collecting  bank  subsequently 
fails  although  it  may  have  been 
insolvent  at  the  time,  unknown 
to  the  drawee.  18  App.  377 
(89  S.  E.  454).  See  also,  18 
App.  599  (89  S.  E.  1094). 

Where  bank  in  violation  of 
instructions  deposited  collec- 
tions to  credit  of  bank  sending 
notes,  and  used  money,  such 
money  was  not  impressed  with 
trust  in  favOr  of  sending  bank 
so  as  to  give  it  priority  over 
general  creditors  and  depositors 
of  collecting  bank.  144/490 
(1)  (87  S.  E.  399). 

Draft  paid ;  remittance 
stopped  by  examiner;  priority 
over  general  creditors  not  al- 
lowed as  to  proceeds  of  draft 
collected.  146/786  (92  S.  E. 
625). 

Title  to  drafts  and  checks  de- 
posited for  collection,  bank  to 
be  responsible  only  as  agent  for 
collection,  remains  in  depositor. 
15  App.  319(2)  (83S.  E.  149). 

Collecting  bank  holding  draft 
"for  collection  and  credit"  is 
agent  of  drawer.  18  App.  599 
(89  S.  E.  1094).  See  18  App. 
377  (89  S.  E.  454). 

Wher>  check  or  draft  is  de- 
posited presumption  is  that  it  is 
deposited  merely  for  collection, 
unless  it  is  drawn  in  favor  of 
bank.  15  App.  319  (3). 

Mere  fact  that  note  was  made 
payable  at  certain  bank,  would 
not,  in  absence  of  special  cir- 
cumstances showing  such  au- 
thority, constitute  the  bank  col- 
lecting agent  for  the  holder  and 
authorize  it  to  collect  same,  the 
bank  not  being  in  possession  of 
the  note  itself.  21  App.  200 
(93  S.  7.  1009). 

Such  an  agency  might  be  im- 


196 


PARK'S  BANKING  LAW  OF  GEORGIA. 


plied  from  a  previous  course  of 
dealings  between  the  parties 
wherein  similar  payments  had 
been  either  authorized  or  rati- 
fied by  the  principal.  21  App. 
200  (93  S.  E.  1009). 

Credit  made  by  bank  in  an- 
ticipation of  collecting  paper 
deposited  may  be  cancelled  by 
bank  if  paper  is  not  paid.  15 
App.  319  (4)  (83S.  E.  149). 

See  Check. 

Consolidation. 

Consolidation  of  one  bank 
with  another  requires  consent 
of  two-thirds  of  the  stock  of 
each .  §  2303 ,  Park's  Ann .  Code ; 
22  App.  348  (5)  (95  S.  E. 
1025). 

Where  bank  itself  can  not 
discharge  its  liabilities  in  due 
course,  directors  may  borrow 
money  or  arrange  for  payment 
of  such  liabilities  by  another 
bank.  22  App.  348  (5)  (95  S. 
E.  1025). 

See  Directors. 

Corporate  Existence. 

Where  there  was  nothing  to 
show  that  bank  had  ceased  to 
be  corporation,  its  continued 
corporate  existence  will  be  pre- 
sumed, though  there  were  no 
returns  to  State  Treasurer  nor 
tax  returns  to  county  tax  col- 
lector. 145/458  (3)  (89  S.  E. 
427). 

Crimes  and  Misdemeanors. 
Embezzlement. 

One  may  be  accessory  in  em- 
bezzlement by  officer  or  em- 
ployee of  bank  or  other  cor- 
porate body  under  §  186,  Park's 
Penal  Code,  who  is  not  himself 
an  officer  or  employee.  118/ 
799  (3)  (45  S.  E.  614). 

Evidence   as   to   defendant's 


straitened  circumstances,  show- 
ing necessity  for  large  sums  of 
money,  admissible  in  indict- 
ment against  officer  of  bank 
for  embezzlement.  10/47 :  but 
see  108/60,  62  (33  S.  E.  829). 
Where  money  of  principal  is 
knowingly  used  by  agent  for 
his  own  private  benefit  and  in 
violation  of  duty  to  principal, 
intention  to  restore  money  not 
prevent  act  from  being  embez- 
zlement. 11  App.  427  (1)  (75 
S.  E.  512). 

Fraudulent  Insolvency. 

Punishment  provided  by  § 
204,  Park's  Penal  Code,  for 
fraudulent  insolvency  of  bank 
does  not  amount  to  imprison- 
ment for  debt.  7  App.  101  (2), 
108  (66  S.  E.  383). 

Intentional  fraud  and  dis- 
honesty of  bank  officials  pun- 
ishable under  §  204  Park's 
Penal  Code,  not  mere  misman- 
agement resulting  in  insolvency. 
7  App.  101  (2),  108  (66  S.  E. 
383). 

It  was  competent  for  the  leg- 
islature to  legalize  as  evidence 
a  presumption  that  the  insolv- 
ency of  a  bank  was  caused  by 
the  fraudulent  act  of  the  of- 
ficers directly  charged  with  its 
affairs  and  also  to  place  upon 
such  officers  the  burden  of  re- 
butting such  presumption.  7 
App.  101  (3),  110  (66  S.  E. 
383)  ;  and  see  124/15  (5)  (52 
S.  E.  74;  128/668  (5)  (57  S. 
E.  889;  19  App.  36  (3)  (90  S. 
E.  1029). 

Either  insolvency  or  failure 
to  redeem  bills  raises  presump- 
tion that  crime  committed  in 
mismanagement  of  bank.  7 
App.  101  (1)  (66S.  E.  383). 

Burden  of  proof  that  trust 
company  named  in  indictment 


DIGEST  OF  DECISIONS. 


197 


is  a  chartered  bank  in  prosecu- 
tion for  fraudulent  insolvency, 
under  §  204  Park's  Penal  Code 
is  upon  the  State,  and  this  bur- 
den can  not  be  successfully  car- 
ried unless  it  appears  that  the 
company  has  obtained  a  char- 
ter authorizing  it  to  exercise 
the  privileges  of  a  bank.  13 
App.  314(9)  (79S.  E.  170). 

Section  204  Park's  Penal 
Code  is  not  violation  of  the 
fifth  or  fourteenth  amendment 
to  the  Constitution  of  the 
United  States,  nor  of  Art.  1, 
Sec.  1,  Par.  3  of  the  State  Con- 
stitution. 142/636  (1,  2,  3) 
(83  S.  E.  540;  15  App.  520  (1, 
2,  3)  (83  S.  E.  891)  ;  148/758 
(4)  (98  S.  E.  267). 

Within  the  meaning  of  §  204 
Park's  Penal  Code  insolvency 
of  bank  is  that  condition  in 
which  its  entire  property  and 
assets  are  insufficient  to  pay  ail 
of  its  debts,  and  §  2306  Park's 
Ann.  Code  does  not  furnish,  a 
definition  of  insolvency  to  be 
applied  in  construing  that  sec- 
tion. 142/636,  637  (4)  (83  S. 
E.  540)  ;  15  App.  520  (4)  (83 
S.  E.  891). 

The  capital  stock  of  a  bank 
issued  and  paid  for  is  not  a  lia- 
bility that  should  be  included 
and  taken  into  account  in  de- 
termining the  question  of  sol- 
vency or  insolvency  of  the 
bank,  on  the  trial  of  one  of  its 
officers  indicted  under  §  204 
Penal  Code.  48/758  (6)  (98 
S.  E.  267). 

Solvency  or  insolvency  is 
matter  admitting  of  opinion 
evidence.  8  App.  129  (16)  (68 
S.  E.  849);  20  App.  61  (11 
(92  S.  E.  555). 

Immaterial  whether  bank  is 
bank  of  issue  or  not  either  in 
prosecution  for  fraudulent  in- 


solvency of  bank  or  for  declar- 
ing fraudulent  dividends.  7 
App.  101  (1)  (66  S.  E.  383); 
8  App.  129  (3)  (68S.  E.  849). 

Illegal  Dividends. 

Evidence  to  show  existence 
of  conditions  which  made  dec- 
laration of  dividend  illegal,  for 
some  time  prior  thereto,  is  rele- 
vant, as  tending  to  establish 
condition  of  bank's  affairs  on 
day  in  question,  as  well  as  to 
show  opportunities  for  knowl- 
edge of  these  conditions.  8 
App.  129  (10)  (68  S.  E.  849). 

Charter  and  by-laws  may  be 
highest  evidence  as  to  who 
should  control  bank,  yet  it  is 
competent  for  witness  to  tes- 
tify that  designated  person  in 
fact  controlled  it.  8  App.  129 
(11)  (68S.  E.  849). 

Expert  accountant  may  give 
summarized  statement  of  what 
books,  containing  multifarious 
details,  show  provided  the 
books  themselves  are  made  ac- 
cessible to  the  court  and  the 
parties.  8  App.  129  (14)  (68 
S.  E.  849);  20  App.  61  (10) 
(92  S.  E.  555). 

Indictment  against  president 
or  one  of  directors  need  not  set 
out  the  names  of  other  direct- 
ors not  indicted,  though  they 
have  participated  in  declaration 
of  dividend ;  offense  of  presi- 
dent or  director  is  several 
rather  than  joint.  8  App.  129 
(2)  (68  S.  E.  849). 

Motives  of  officers  imma- 
terial if  they  did  those  acts 
which  which  are  penal  under  § 
208,  Park's  Penal  Code.  8  App. 
129  (7)  (68S.  E.  849). 

Evidence  as  to  transactions 
had  by  partnership  with  bank 
admissible  in  connection  with 
other  evidence  tending  to  show 


198 


PARK'S  BANKING  LAW  of  GEORGIA. 


defendant  was  member  of  part- 
nership. 8APP.  129  (21)  (68 
S.  E.  849). 

Worthless  Checks. 

In  order  to  sustain  the  valid- 
ity of  §  718  (d), -Park's  Penal 
Code,  relating  to  passing  worth- 
less checks,  it  will  be  construed 
as  requiring  fraudulent  intent 
to  constitute  such  an  act  a 
crime.  17  App.  811  (1)  (88 
S.  E.  687). 

Drawing  post-dated  check 
and  failure  to  have  funds  in 
bank  at  date  set  does  not  con- 
stitute offense  of  passing  worth- 
less check.  17  App.  811  (2) 
(88  S.  E.  687). 

See  Insolvency. 

Deed. 

Deed  made  by  president  of 
bank  and  countersigned  by 
cashier  was  valid,  charter  pro- 
viding that  all  contracts  should 
be  signed  by  president  and 
countersigned  by  cashier.  17/ 
99;  see  134/627  (2)  (68  S.  E. 
436). 

Deposits. 
In  General. 

Deposit  being  general  and 
not  evidenced  by  any  regular 
certificate  of  deposit  or  other 
writing  fixing  time  of  payment, 
statute  of  limitations  not  com- 
mence to  run  in  favor  of  bank 
until  demand  and  refusal,  de- 
mand not  being  delayed  until 
right  has  become  stale.  88/333 
(14S.  E.  554);  see  98/5 18  (25 
S.  E.  572). 

Bank  not  liable  for  interest 
on  funds  held  on  general  de- 
posit in  absence  of  special  con- 
tract therefor.  81/597  (7  S 
E.  738). 


If  bank  pays  interest  to  de- 
positors, it  may  agree  with 
them  at  what  time  and  in  what 
amounts  interest  will  be  paid. 
114/788  (3)  (40  S.  E.  825). 

Where  vendor  of  cotton  re- 
ceived check  in  payment  there- 
for, delivered  up  check,  had 
amount  placed  in  pass  book, 
and  took  possession  of  book, 
sale  was  complete  and  relation 
of  debtor  and  creditor  existed 
between  vendor  and  bank.  66/ 
394. 

General  deposit  of  money  in 
bank  is  loan  to  bank  by  de- 
positor and  not  distinguishable 
from  ordinary  loan  from  one 
man  to  another,  payable  on  de- 
mand. 52/496;  78/610  (3  S. 
E.  772) ;  96/254,  259  (22  S. 
E.  1001;  126/136,  145  (54  S. 
E.  977) ;  see  12  App.  488  (77 
S.  E.  589). 

Deposit  of  money  in  bank, 
creates  chose  in  action.  146/ 
447  (91  S.  E.  487). 

Where  A  deposits  money 
with  direction  that  it  is  to  be 
paid  on  check  which  he  has 
given  or  will  give  to  C,  the 
money  belongs  to  A  until  the 
bank  either  pays  it  or  promises 
C  to  pay  it,  unless  it  be  de- 
posited at  the  instance  or  pro- 
curement of  C,  or  under  ar- 
rangement with  him.  51/325 
(2). 

Deposits  are  of  two  kinds, 
viz :  those  in  which  banker  be- 
comes bailee,  title  remaining 
with  depositor,  and  those  where 
depositor  parts  with  title  and 
lends  money  to  banker,  who,  in 
consideration  of  use  of  loan, 
agrees  to  refund  same  amount 
or  any  part  thereof  on  demand. 
121/278,  280  (48  S.  E.  945) ; 
see  12  App.  48  (77  S.  E.  589). 

Statement   of    account    ren- 


DIGEST  OF  DECISIONS. 


199 


dered  depositor  showing  bal- 
ance due  him  held  sufficient  evi- 
dence of  bank's  indebtedness  to 
him.  11/434. 

Liability  of  bank  to  deposi- 
tors under  Scaling  Ordinance 
of  1865.  52/515. 

Where  money  deposited  by 
grandmother  was  gift  from 
mother  to  child,  whether  after 
notice  of  that  fact  to  bank, 
mother's  assent  to  payment  of 
money  on  grandmother's  check 
could  be  inferred  from  fact  that 
bank  sent  for  mother  and  she 
and  grandmother  conversed 
about  the  deposit  and  grand- 
mother's right  to  draw  it  out 
and  she  did  not  then  or  after- 
wards give  notice  that  she  still 
objected  to  payment  to  grand- 
mother, she  having  previously 
given  express  notice  of  objec- 
tion, was  question  of  fact  for 
jury.  89/218  (15  S.  E.  482). 

Deposit  by  husband  in  wife's 
name,  with  agreement,  that  he 
might  draw  it  out  on  checks 
signed  with  her  name  by  him- 
self ;  bank  not  liable  to  her  for 
money  so  drawn.  21  App.  183 
(94  S.  E.  90). 

Absence  of  entry  on  books 
of  bank  has  evidential  value  as 
tending  to  show  that  no  deposit 
made,  where  cashier  testified 
that  deposit  slips  were  always 
entered  on  books  on  day  of  de- 
posit. 137/285  (6-a)  (73  S.  E. 
387). 

Deposit  may  be  shown  by 
parol  proof.  18  App.  654  (2) 
(90  S.  E.  225)  ;  18  App.  610 
(89  S.  E.  1095). 

That  deposit  not  to  be  en- 
tered on  books  does  not  neces- 
sarily extend  the  transaction 
beyond  the  scope  of  the  cash- 
ier's authority  and  the  effect  of 
such  transaction  may  amount 


to  a  deposit  in  the  bank  itself. 
20  App.  121  (2)  (92  S.  E. 
759). 

Title  to  money  placed  on 
general  deposit  passes  to  bank 
the  moment  deposit  is  made. 
128/577  (1)  (58  S.  E.  28); 
see  108/602,  611  (34  S.  E. 
160) ;  12  App.  488  (77  S.  E. 
589). 

Where  checks  deposited  by 
plaintiff  in  ordinary  course  of 
business  were  credited  as  cash, 
and  he  was  entitled  to  draw 
against  deposit  at  once,  check 
so  deposited  became  property 
of  bank,  which  was  not  entitled 
to  recharge  the  same  on  its  sub- 
sequently becoming  lost  in  the 
mail  •  in  process  of  collection. 
142/236  (82  S.  E.  625). 

Where  draft  is  deposited  by 
payees  in  bank  other  than  that 
on  which  it  is  drawn,  "for  de- 
posit *  *  *  to  the  credit 
of"  payees,  prhna  facie  title  to 
draft  and  proceeds  thereof  is  in 
payees.  144/181  (1)  (86  S. 
E.  538). 

Whether  parties  intended 
that  title  to  draft  should  be  in 
bank  in  which  deposited,  rather 
than  in  payees,  was  for  jury 
under  evidence  here.  144/181 
(1)  (86S.  E.  538). 

Where  evidence  did  not  show 
that  title  to  draft  was  in  plain- 
tiff bank,  error  to  direct  ver- 
dict for  plaintiff.  144/181  (1) 
(86  S.  E.  538). 

Title  to  checks  and  drafts  re- 
ceived on  deposit  as  cash  cre- 
ates relation  of  debtor  and 
creditor  between  bank  and  de- 
positor. 15  App.  319  (1)  (83 
S.  E.  149). 

Where  parties  intend  that 
title  to  paper  shall  pass  to  bank, 
that  bank  is  understood  to  have 
right  to  charge  amount  back  if 


200 


PARK'S  BANKING  LAW  OF  GEORGIA. 


it  shall  prove  uncollectible,  will 
not  change  relation  of   debtor 
and  creditor.     15  App.  319  (4) 
(83  S.  E.  149). 
See  Bill  of  Lading. 

Certificate  of  Deposit. 

Certificate  of  deposit  is  debt 
within  meaning  of  charter  pro- 
vision making  directors  person- 
ally liable  for  indebtedness  in 
excess  of  given  amount.  30/ 
580. 

Certificate  of  deposit  payable 
to  order  is  negotiable,  and  in- 
dorser  thereon  is  liable  on  his 
indorsement.  7/84. 

Certificate  of  deposit  payable 
to  order  is  negotiable ;  not  ren- 
dered indefinite  by  condition  as 
to  interest  payment.  147/637 
(95  S.  E.  223). 

Certificate  of  deposit  payable 
to  order,  but  indicating  no  time 
of  payment  other  than  can  be 
inferred  from  words  "interest 
at  the  rate  of  7  per  cent,  on 
call,  and  10  per  cent,  per  an- 
num," is  payable  on  demand 
and  due  immediately.  56/605 
(3);  see  64/42  (1). 

Certificate  of  deposit  payable 
to  order  "on  return  of  this  cer- 
tificate properly  endorsed"  not 
due  until  payment  actually  de- 
manded. 108/357  (33  S.  E. 
985);  147/638  (95  S.  E.  223). 

Certificate  of  deposit  certify- 
ing that  sum  deposited  to  credit 
of  third  person  subject  to  check 
of  such  person,  and  reserving 
no  control  to  depositor  is  prom- 
ise of  bank  to  pay  to  third  per- 
son upon  presentation  of  cer- 
tificate; but  if  deposit  subject 
to  check  only  on  certain  condi- 
tions, promise  to  pay  depends 
upon  compliance  with  condi- 
tions ;  general  allegation  of 
compliance  subject  to  special 


demurrer.     127/448  (56  S.  E. 
486). 

Certificate  of  deposit  is  sub- 
sisting chose  in  action  and  rep- 
resents fund  it  describes,  so 
that  delivery  of  it  as  gift  is  an 
equitable  assignment  of  fund 
for  which  it  calls.  3  App.  742 
(1)  (60  S.  E.  480). 

Delivery  of  certificate  of  de- 
posit was  valid  gift  causa  mor- 
tis. Subsequent  deposit  of  cer- 
tificate by  donor  and  giving 
check  for  its  amount  did  not 
affect  validity  of  gift  but  was 
means  adopted  to  perfect  it. 
Such  check  operated  as  equita- 
ble assignment  of  certificate 
and  therefore  of  fund  it  rep- 
resented. Failure  of  donee  to 
present  check  until  after  death 
of  donor  not  revocation  of  gift. 
3  App.  742  (2)  (60S.  E.  480). 

Sending  certificate  of  deposit 
through  mails  to  party  to  whom 
payer  had  previously  expressed 
an  intention  to  give  it  is  a  suf- 
ficient delivery  to  consummate 
the  gift  although  certificate  not 
indorsed.  18  App.  182  (89  S. 
E.  161). 

Unsigned  notation  on  certifi- 
cate of  deposit  that  in 'event  of 
death  of  the  payee  it  was  to  be 
paid  to  two  named  parties  does 
not  constitute  a  gift  of  the  cer- 
tificate where  there  was  no  de- 
livery. 18  App.  418  (89  S.  E. 
492)". 

Certificate  of  deposit  payable 
"to  order  of  administrator, 
12  months  after  date,  on  re- 
turn of  certificate  properly  in- 
dorsed, with  interest  at  the  rate 
of  six  per  cent,  per  annum.  In- 
terest will  cease  at  maturity," 
is  not  due  until  it  is  returned  to 
bank  properly  indorsed  and 
payment  thereof  is  actually  de- 


DIGEST  OF  DECISIONS. 


201 


manded.     145/508  (1)    (89  S. 
E.  516). 

Garnishment. 

Bank  under  summons  of  gar- 
nishment receiving  deposits  of 
defendant  and  paying  them  out 
on  his  check,  held  liable  to  the 
garnishing  creditor  for  amount 
deposited  up  to  time  of  filing 
answer.  51/325  (1). 

Where  agent  deposited  in 
bank  to  his  own  credit  money 
belonging  to  principal  and 
creditor  of  agent  garnished 
bank,  principal  could  file  claim 
affidavit  and  bond  and  have  the 
money  paid  to  him  on  agent's 
check.  52/494. 

Money  deposited  to  credit  of 
"P,  agent,"  could  be  reached  by 
garnishment  at  instance  of 
creditor  of  P,  and  if  bank  knew 
of  creditor's  contention  that 
money  belonged  to  P  individu- 
ally, it  could  not,  except  at  its 
peril,  pay  the  money  to  the  al- 
leged principal.  Creditor  could 
not  obtain  injunction  to  prevent 
bank  from  so  paying  the 
money,  though  the  debtor  was 
insolvent.  99/300  (25  S.  E. 
697). 

Deposit  of  check,  in  name  of 
one  who  had  received  it  to  take 
up  his  note  to  the  maker  of  the 
check  when  the  note  should  be 
presented  by  an  indorsee,  was 
a  trust  fund  for  that  purpose, 
and  not  subject  to  garnishment 
by  another  creditor.  19  App. 
61  (90S.  E.  975). 

A  principal  may  follow  .his 
money  deposited  by  an  agent  in 
the  latter's  name,  and  recover 
the  same  wljerever  found,  un- 
less the  rights  of  innocent  third 
persons  have  intervened.  § 
3577,  Park's  Ann.  Code.  52/ 
497. 


Generally  payee  of  bill  of  ex- 
change indorsing  it  "for  deposit 
to  credit  of"  himself  retains 
ownership  of  bill  and  its  pro- 
ceeds until  so  deposited  and 
proceeds  in  hands  of  collecting 
bank  are  subject  to  garnish- 
ment as  his  assets.  87/45  (1) 
(13  S.  E.  160);  see  73/383; 
89/108  (3)  (14  S.  E.  891); 
10  App.  716  (74S.  E.  78). 

Bet-Off. 

Against  suit  to  recover  bal- 
ance due  on  general  deposit  ac- 
count, bank  may  set  off  matured 
debt  due  to  it  by  depositor. 
129/582  (2)  (59  S.  E.  291). 
See  19  Ga.  App.  575  (91  S.  E. 
904). 

But  the  exercise  of  this  right 
is  optional.  Too  late  to  exer- 
cise right  of  set-off  after  ap- 
praisers appointed  to  set  apart 
year's  support  to  widow  of  de- 
positor. 12  App.  488  (77  S.  E. 
589). 

Deposit  made  by  debtor  of 
bank  in  name  of  "R.  &  Co." 
competent  for  bank  to  show 
funds  really  money  of  R  and 
claim  application  of  fund  to  in- 
debtedness. 129/582  (1)  (59 
S.  E.  291). 

Bank  having  money  on  de- 
posit with  another  and  becom- 
ing insolvent,  being  then  in- 
debted to  depositary  on  notes 
exceeding  amount  of  deposit, 
depositary  could  appropriate 
deposit,  though  notes  not  due. 
96/254  (1)  (22S.  E.  1001). 

Fact  that  bank  which  owned 
note  failed  to  exercise  its  right 
of  set-off  and  allowed  principal 
debtor  to  check  out  all  money 
on  deposit  not  discharge  surety 
on  the  note.  126/136  (54  S.  E. 
977). 

Bank  being  payee  and  owner 


202 


PARK'S  BANKING  LAW  OF  GEORGIA. 


of  accepted  bill,  under  no  duty 
to  acceptor  to  apply  funds  of 
drawer  on  general  deposit  to 
payment  of  bill.  78/222  (6) 
(2  S.  E.  547);  s.  c.  79/810 
(6)  (2  S.  E.  547). 

State  depositary  becoming 
insolvent  while  indebted  to 
State,  and  being  put  in  hands 
of  receiver,  depositors  who  are 
indebted  to  bank  on  notes  can 
set  off  against  such  notes  in 
hands  of  receiver  amounts  due 
them  on  their  deposits.  94/95 
(21  S.  E.  146). 

Wife  of  president  of  bank 
sued  as  depositor  on  overdraft 
could  set  off  money  her  hus- 
band had  collected  for  her  and 
deposited  to  his  own  credit. 
108/400  (33  S.  E.  987). 

Bank's  claim  against  assignee 
could  not  be  set  off  against  sub- 
sequent assignee.  19  App.  575 
(91  S.  E.  904). 

Bank  may  apply  deposit  to 
matured  debt  due  it  regardless 
of  depositor's  insolvency  and  of 
whether  he  is  liable  as  principal 
or  only  secondarily,  and  though 
check  has  been  drawn  against 
deposit  for  money  previously 
collected  by  depositor  for 
payee.  14  App.  240  (80  S.  E. 
703). 

Where  receiver  was  appoint- 
ed for  bank  placed  in  exami- 
ner's hands  pursuant  to  §  2290, 
Park's  Ann.  Code,  debtor  could 
not  by  securing  transfer  to  him- 
self of  depositor's  account  after 
posting  of  notice  have  same  set 
off  at  its  face  value  against  in- 
debtedness. 144/78  (86  S.  E. 
231). 

Special  Deposit. 

By  habitually  receiving  spe- 
cial gratuitous  deposits  through 
cashier,  national  banks  will  in- 


cur liability  for  gross  negli- 
gence in  respect  to  such  depos- 
its. 58/369  (1). 

Bank  liable  for  special  de- 
posit of  bonds,  though  acting 
without  pay,  stolen  by  cashier, 
unless  bank  shows  it  did  its  full 
duty  in  selecting  such  officer, 
and  did  not  disregard  indica- 
tions of  dishonesty.  93/503 
(21  S.  E.  55)  ;  95/394  (22  S. 
E.  628). 

Special  deposit  consisting  of 
stocks  and  bonds,  written  au- 
thority, indorsed  on  the  certifi- 
cate of  deposit  to  pay  out  the 
dividends  and  coupons,  no  au- 
thority for  surrendering  the 
stocks  and  bonds  themselves. 
58/369  (3). 

Special  deposit  withdrawn  by 
person  with  authority  from  de- 
positor, bank  not  liable,  though 
neither  corporation  nor  its  of- 
ficer had  any  knowledge  of  the 
authority.  58/369  (2). 

Deposit  may  be  for  a  specific 
purpose;  such  a  deposit  while 
partaking  of  the  nature  of  a 
"special"  deposit  more  accu- 
rately falls  within  a  class  of  its 
own  and  may  be  defined  as  one 
in  the  making  of  which  a  trust 
is  constituted  with  a  special 
duty  as  to  its  application  as- 
sumed by  the  bank.  21  App. 
356,364  (94S.  E.  611). 

A  deposit  of  part  of  the  pro- 
ceeds of  a  loan  made  by  the 
bank  under  a  requirement  that 
such  fixed  amount  be  left  on 
deposit  with  the  bank  can  not 
properly  be  regarded  as  either 
a  special  deposit  or  one  for  a 
specific  purpose,  but  is  an  en- 
forced deposit  and  renders  the 
loan  transaction  usurious.  21 
App.  356,  365  (94  S.  E.  611). 

Deposit  to  pledgee's  credit  to 
protect  him  from  possible  loss 


DIGEST  OF  DECISIONS. 


203 


on  account  of  releasing  goods 
pledged,  held  to  be  general,  not 
special  deposit,  though  bank 
had  notice  of  depositor's  pur- 
pose. 119/901  (47  S.  E.  208). 
Bank  is  agent  of  debtor  to 
pay  over  money  deposited  for 
creditor.  20  App.  122  (92  S. 
E.  759) . 

Deposit  by  debtor  in  bank  to 
account  of  his  creditor  not  con- 
stitute payment  to  creditor,  un- 
less he  consents  to  deposit ;    if 
made  without  his  consent,  bank 
is  merely  debtor's  agent  to  pay 
money     to     creditor.       116/45 
(2)  (42  S.  E.  475). 
See  Bill  of  Lading;    Di- 
rectors. 

Directors. 
In  General. 

Control  of  all  property  of 
bank  is  generally  vested  in  di- 
rectors. 7/196. 

Agreement  entered  into  by 
directors  of  a  bank  with  a  trust 
company,  which  assumes  all  the 
liabilities  of  the  bank  upon  a. 
transfer  of  all  of  its  assets,  to 
indemnify  the  trust  company 
against  loss  thereon  is  enforce- 
able. 22  App.  348  (95  S.  E. 
1025). 

Authority  of  officers,  by  reso- 
lution of  directors,  to  give  notes 
and  collaterals  for  borrowed 
money,  extended  to  renewals, 
where  no  revocation.  147/273 
(93  S.  E.  880). 

Directors  not  repudiating 
legal  act  of  cashier,  done  for 
benefit  of  bank,  held  that  such 
act  was  act  of  the  bank.  20/ 
276  (8). 

Director  had  no  authority  to 
ratify  unauthorized  sale  by 
bank's  attorney  of  land  belong- 
ing to  bank.  108/376  (33  S.  E. 
1003). 


Directors  are  agents  of  cor- 
poration not  of  stockholders; 
but  if  they  stipulate  for  ulti- 
mate redemption  of  bills  of 
bank,  if  bank  be  bound  by  acts 
of  agent,  the  stockholders  are 
liable  upon  their  special  agree- 
ment. 18/412  (13). 

Benefit  from  deposit  not  such 
as  would  disqualify  director 
from  voting  as  councilman  to 
make  the  bank  the  city's  de- 
pository. 22/278-9  (4)  (96  S. 
E.  14). 

Liability  of. 

Directors  made  individually 
liable  for  excess  of  bank's  in- 
debtedness over  amount  al- 
lowed by  charter,  held  that 
their  liability  was  not  penal  but 
remedial ;  joint  and  not  sev- 
eral; and  that  neither  absence 
nor  dissent  would  relieve  di- 
rector from  liability.  18/318 
(2);  20/275  (3);  30/580. 

Directors  not  relieved  from 
liability  imposed  by  charter  for 
loss  arising  from  waste  or  neg- 
lect of  assignee  of  bank.  30/ 
580  (4). 

Such  liability  did  not  expire 
ivith  expiration  of  act  of  in- 
corporation. 30/581  (7). 

Directors'  liability  under 
charter  for  excess  of  debts  of 
bank  over  given  amount  was 
statutory  liability  and  not 
barred  until  after  twenty  years. 
30/580;  12/104. 

Certificate  of  deposit  is  debt 
within  meaning  of  charter  pro- 
vision making  directors  person- 
ally liable  for  indebtedness  in 
excess  of  given  amount.  30/ 
580. 

Director  of  bankrupt  bank 
cannot  buy  up  claims  against  it 
at  a  discount  and  entitle  him- 
self to  credit  therefor  at  full 


204 


PARK'S  BANKING  LAW  OF  GEORGIA. 


face  value  in  settlement  with 
creditors  on  his  personal  liabil- 
ity as  a  stockholder.  60/174. 

Notice  to. 

Notice  or  knowledge  of  fail- 
ure of  consideration  of  note 
which  director  sells  to  bank  be- 
fore maturity  is  not  imputable 
to  bank,  where  seller  acted  only 
for  himself  and  bank  was  rep- 
resented by  another  official. 
112/823  (1)  (38  S.  E.  103). 

See  Cashier;  National 
Bank. 

Discount. 

The  import  of  the  word  "dis- 
count" necessarily  carries  with 
it  the  charging  of  interest  in 
advance  and  is  within  the  ex- 
press granted  power  of  na- 
tional banks.  21  App.  356,  361 
(94  S.  E.  611). 

See  Accountant  and  Gen- 
eral Manager;  Presi- 
dent; Usury. 

Dividends. 

Dividends  can  be  declared 
only  out  of  net  profits.  103/ 
145  (1)  (29  S.  E.  695);  130/ 
515  (5)  (61  S.  E.  117). 

See  Crimes  and  Misde- 
meanors. 

Fraudulent  Organization. 

Fraudulent  organization  of  a 
bank  not  set  up  as  defense 
against  payment  of  an  accept- 
ance. 25/534. 

Charges  in  bill  that  small 
sum  was  paid  in  money  for 
bank  stock  and  balance  paid  in 
notes,  and  that  purchasers  be- 
came president  and  directors 
and  reported  to  Governor  that 
one-fourth  of  stock  was  paid 
in,  which  they  knew  was  un- 


true,  require   answer   and   ex- 
planation.    24/273   (8). 

Garnishment. 

See  Bill  of  Lading;   De- 
posit. 

Gift  Causa  Mortis. 
See     Deposit;      Savings 

Bank. 
Guaranty. 

Guaranty  by  bank  solely  for 
benefit  of  another,  ultra  vires. 
But  agreement  to  "guarantee" 
payment  of  draft,  may  be  orig- 
inal and  not  a  collateral  under- 
taking and  binding  upon  the 
bank.  19  App.  177  (91  S.  E. 
251);  22  App.  700  (97  S.  E. 
205). 

See  National  Banks. 

Husband  and  Wife. 
See  Married  Woman. 

Insolvency. 

Where  insolvent  bank  gave  a 
note  of  one  of  its  customers  in 
payment  of  a  check,  instead  of 
cash,  it  was  not  necessarily  a 
fraud  against  creditors  and  did 
not  constitute  a  preference. 
147/436  (94  S.  E.  554). 

§  2360,  Park's  Ann.  Code, 
prohibiting  conveyances  and  as- 
signments by  bank  in  contem- 
plation of  insolvency  or  after 
insolvency  except  for  the  bene- 
fit of* all  creditors  and  stock- 
holders has  no  application 
against  an  innocent  assignee  for 
value  without  knowledge  of  the 
condition  of  the  bank.  19  App. 
271  (91  S.  E.  339). 

Meaning  of  notice  or  knowl- 
edge discussed.  107/565,  569 
(33  S.  E.  802)  ;  see  12  App. 
186,  189  (76S.  E.  1077). 


DIGEST  OF  DECISIONS. 


205 


Depositor  or  bona  fide  cred- 
itor who  draws  check  on  the 
bank  or  receives  effects  there- 
from without  notice  of  or  rea- 
son to  suspect  insolvency  is  a 
bona  fide  purchaser.  86/284 
(3-2)  (12S.  E.  635). 

Evidence  here  authorized 
holding  that  trustees  of  clear- 
ing house  association  were  not 
chargeable  with  notice  of  in- 
solvency of  bank  at  time  of  is- 
suance and  delivery  to  it  of 
clearing  house  certificates. 
132/100  (8)  (63  S.  E.  907). 

Depositor  checking  out 
money  in  regular  course  of 
business,  without  notice  of  in- 
solvency of  bank  protected ; 
but  if  it  has  notice  and  bank 
pays  check  with  intent  to  create 
a  preference,  he  is  liable  to  re- 
pay difference  between  amount 
paid  and  his  pro  rata  share  of 
bank's  assets.  128/577  (2) 
(58  S.  E.  28). 

Assignment  to  pay  existing 
debt  not  void  because  amount 
assigned  larger  than  reasonably 
sufficient  to  pay  debt  and  be- 
cause there  is  stipulation  that 
excess  shall  be  returned  to 
bank.  10/10  (5). 

Preference  is  unlawful  only 
when  transfer  is  made  to  sat- 
isfy antecedent  debt.  132/100, 
103  (63  S.  E.  907). 

Fraudulent  transfer  by  bank 
in  contemplation  of  insolvency, 
not  made  by  pledge  of  collat- 
eral, unless  for  purpose  of  se- 
curing an  antecedent  debt.  19 
App.  435  (3)  (91  S.  E.  509). 

Creditor  holding  collateral  is 
entitled  to  share  in  distribution 
of  assets  of  insolvent  bank  on 
amount  of  his  debt  reduced  by 
value  of  collateral.  147/74  (92 
S.  E.  868). 

Individual  liability  of  stock- 


holders to  depositors  is  asset 
of  insolvent  bank.  §  2249, 
Park's  Arm.  Code.  141/227 
(3)  (80  S.  E.  1085) ;  148/663 
(98  S.  E.  86)  ;  148/719  (98 
S.  E.  343) ;  148/854  (98  S.  E. 
491). 

Capital  stock  not  a  liability  to 
be  taken  into  account  in  deter- 
mining the  question  of  a  bank's 
insolvency  on  the  trial  of  one 
of  its  officers  for  the  penal  of- 
fense of  permitting  it  to  be- 
come fraudulently  insolvent. 
148/758  (98  S.  E.  26). 

Stockholder  is  not  a  creditor 
in  determining  the  question  of 
solvency  or  insolvency.  148/ 
758,  761  (98  S.  E.  267)  ;  20 
App.  61  (92  S.  E.  555). 

Receivership,  injunction 
against  creditors  and  other 
equitable  relief,  not  ordinarily 
to  be  granted  on  suit  by  di- 
rectors. But  stockholders  will 
not  be  allowed  to  complain 
thereof  collaterally  in  suit 
brought  by  receivers  to  enforce 
their  individual  liability  to  de- 
positors. 148/858  (98  S.  E. 
491). 

Same  defenses  available 
against  receiver  as  against  bank 
itself.  20  App.  36  (92  S.  E. 
'397). 

See  Crimes  and  Misde- 
meanors; Cashier;  De- 
posit. 

Interest. 
See  Discount. 

Loans. 

Charter  provisions  limiting 
amount  of  loans,  requiring  two 
or  more-  good  indorsers  on 
notes  and  bills  discounted,  and 
providing  that  all  notes  dis- 
counted at  the  bank  should  be 
renewed  annually,  were  direct- 


206 


PARK'S  BANKING  LAW  OF  GEORGIA. 


ory  only,  and  debt  could  be  col- 
lected though  contracted  in  dis- 
regard of  these  provisions.  2/ 
92  (9). 

Married  Woman. 

Where  bank  did  not  know  or 
have  reason  to  know  that 
money  used  by  husband  in  pay- 
ment of  debt  due  by  him  to  it 
was  money  of  wife,  wife  will 
be  bound.  20  App.  220  (2) 
(92  S.  E.  964). 

Messenger. 

Messenger  whose  business 
was  only  to  collect  commercial 
papers,  notice  to,  of  dissolution 
of  partnership,  not  notice  to 
bank.  97/582  (3)  (25  S.  E. 
362). 

National  Banks. 

Comptroller  of  Currency. 

Comptroller  of  Currency ; 
authority  of  deputy  and  of  act- 
ing Comptroller.  146/118  (90 
S.  E.  965). 

Jurisdiction  of  State  Courts. 

Non-resident  national  bank 
giving  attachment  bond  could 
be  sued  on  it  in  this  State  in  the 
court  to  which  the  attachment 
was  returnable.  Service  in 
such  suit.  78/449  (3  S.  E. 
269). 

Judgment  rendered  in  State 
court  against  national  bank,  re- 
turn of  nulla  bona  made,  and 
bank  ceasing  to  discharge  func- 
tions as  fiscal  agent  of  United 
States  and  disposing  of  assets 
among  stockholders,  injunction 
granted  and  receiver  appointed. 
63/549. 

Until  receiver  appointed  by 
Federal  court,  neither  law  nor 
comity  requires  State  court  to 
suspend  its  equitable  remedy 


until  former  shall  act.    63/549. 

State  court  could  not  enter- 
tain stockholders'  suit  to  wind 
up  affairs  of  national  bank, 
where  no  other  relief  is  prayed. 
143/627  (85  S.  E.  881). 

Where  directors  of  insolvent 
national  bank  undertake  to 
liquidate  its  affairs  and  consoli- 
date it  with  another  bank, 
stockholders'  suit  attacking  such 
consolidation,  but  praying  no 
relief  against  the  directors  of 
the  absorbing  bank,  though 
praying  to  wind  up  affairs  of 
liquidating  bank,  must  be 
brought  in  Federal  court.  143/ 
627  (85  S.  E.  881). 

National  bank,  having  gone 
into  voluntary  liquidation,  li- 
able to  actions  as  domestic  cor- 
poration. 65/603. 

Seizure  of  property  belong- 
ing to  national  bank  before 
final  judgment,  by  virtue  of 
any  attachment  issued  under 
State  law,  is  void,  and  bond 
given  by  bank  to  dissolve  such 
attachment  served  by  summons 
of  garnishment  is  also  void. 
91/264  (18  S.  E.  137). 

National  bank  can  not  be  en- 
joined from  selling  land  under 
power  in  mortgage  transferred 
to  it.  147/753  (95  S.  E.  246). 

National  bank  can  not  be  en- 
joined from  prosecuting  suit 
on  note  before  final  judgment. 
148/498  (97  S.  E.  70). 

Powers. 

A  national  bank  is  a  corpora- 
tion, powers  of  which  are  de- 
fined and  limited  by  acts  of 
Congress  authorizing  creation 
of  such  banks.  10  App.  270 
(1).  (73  S.  E.  405). 

Decisions  of  the  United 
States  Supreme  Court  are  of 
paramount  authority  as  to  pow- 


DIGEST  OF  DECISIONS. 


207 


ers  and  liabilities  of  national 
banks.  10  App.  270  (2)  (73 
S.  E.  405). 

Government  alone  is  entitled 
to  complain  of  violation  by  na- 
tional bank  of  National  Bank 
Act.  18  App.  564  (90  S.  E. 
91). 

National  bank  is  not  prohib- 
ited by  National  Bank  Act  from 
taking  mortgage  on  real  estate 
by  way  of  security  on  debt  pre- 
viously contracted.  18  App. 
564  (90S.  E.  91). 

A  national  bank  cannot  au- 
thorize or  ratify  an  absolutely 
ultra  vires  act  of  its  agents  or 
officers.  10  App.  270  (3)  (73 
S.  E.  405). 

Neither  the  directors  nor 
officers  or  agents  of  a  national 
bank  have  authority  to  institute 
prosecutions  for  violations  of 
the  laws  of  the  State,  or  to 
cause  requisition  papers  to  be 
issued  for  alleged  criminals.  10 
App.  270  (4)  (73S.  E.  405). 

National  bank,  in  negotiating 
its  paper,  can  bind  itself  for 
payment  thereof  by  its  indorse- 
ment thereon ;  but  it  cannot 
guarantee  payment  of  paper  of 
others,  or  become  surety  there- 
on, solely  for  benefit  of  latter. 
135/614  (1)  (69  S.  E.  1123). 
See  18  Ga.  App.  151  (89  S.  E. 
994-999). 

National  bank  could  not 
ratify  cashier's  act  in  obtaining 
from  third  person  a  loan  to  a 
borrower  from  the  bank  of 
amount  greater  than  that  al- 
lowed by  the  Federal  statute, 
and  was  not  estopped  to  set  up 
invalidity  of  bank's  guaranty 
of  payment  by  such  borrower 
to  the  third  person,  extended 
by  the  cashier.  135/614  (2) 
(69  S.  E.  1123). 

National   bank  cannot   have 


lien  on  shares  of  stockholders. 
115/608  (1)  (41  S.  E.  983). 

Sale  of  stock  in  national  bank 
to  pay  assessment  under  Rev. 
Stat.,  §  5205,  void  if  price  ob- 
tained does  not  equal  assess- 
ment. 103/851  (31  S.  E.  78). 

Note  given  to  prevent  prose- 
cution for  officer's  violation  of 
national  bank  law,  void.  19 
App.  208  (91  S.  E.  346). 

Under  the  National  Bank 
Act,  cashiers  of  national  banks 
hold  their  office  subject  to  dis- 
missal at  the  pleasure  of  the 
board  of  directors,  and  al- 
though elected  for  a  fixed  term 
cashier  may  be  dismissed  be- 
fore expiration  thereof  with- 
out cause.  23  App.  441  (2) 
(98  S.  E.  402). 

Taxation. 

Business  of  a  national  bank 
can  not  be  taxed  by  municipal- 
ity. 59/648';  see  105/567  (32 
S.  E.  617). 

National  banks  are  not  sub- 
ject to  license  tax  by  state  or 
municipalities.  62/645.  Tax 
imposed  on  presidents  of  all 
banks  doing  business  in  this 
State  is  inoperative  when  ap- 
plied to  presidents  of  national 
banks.  105/567. 

Usury. 

Section  of  national  banking 
act  providing  that  debtor  who 
has  paid  bank  more  than  legal 
interest  may  recover  twice  the 
amount  of  the  interest  paid, 
construed.  135/687  (70  S.  E. 
246). 

Penalty  imposed  upon  na- 
tional banks  for  charging  usury 
is  exclusive;  law  of  this  State 
that  homestead  waiver  when 
part  of  usurious  contract  is 
void,  not  applicable  to  national 


208 


PARK'S  BANKING  LAW  OF  GEORGIA. 


banks.  112/232  (37  S.  E. 
381);  see  12  App.  472  (77  S. 
E.  320) ;  21  App.  356  (94  S. 
E.  611);  22  App.  58  (1)  (95 
S.  E.  381). 

Though  no  interest  collecti- 
ble where  usury  charged,  plea 
praying  that  excess  be  deduct- 
ed, and  deduction  made,  de- 
fendant can  not  complain  of 
verdict.  109/573  (1)  (35  S. 
E.  61). 

State  statutes  relating  to 
usury  have  no  application  to 
negotiable  instruments  held  by 
national  banks.  Remedy  given 
by  Act  of  Congress  against  na- 
tional banks  for  taking  usurious 
interest  is  exclusive.  12  App. 
472  (1)  (77  S.  E.  320). 

The  rule  is  applicable  in  all 
cases  where  negotiable  instru- 
ment infected  with  usury  is 
made  payable  to  such  bank 
originally,  or  where  it  has  been 
discounted  by  the  bank,  and  the 
bank  as  holder,  is  endeavoring 
to  collect  the  face  thereof  with 
knowledge  of  the  usury.  12 
App.  472  (2)  (77  S.  E.  320). 

Not  usury  for  national  bank 
to  take  interest  in  advance  at 
highest  legal  rate  by  way  of 
discount.  21  App.  356  (94  S. 
E.  611). 

Penalty  on  national  banks 
prescribed  by  §  4198,  U.  S.  R. 
S.,  for  the  taking  of  usury  can 
not  be  recovered  unless  the 
usurious  interest  has  been  ac- 
tually paid.  21  App.  356,  366 
(94  S.  E.  611). 

When  usury  on  notes  for 
loan  is  charged  by  national 
bank,  the  bank  can  not  recover 
on  a  renewal  note  more  than 
amount  of  original  loan,  though 
only  legal  interest  be  charged 
on  the  renewal.  22  App.  58 
(2)  (95  S.  E.  381). 


Limitation  of  two  years,  in 
National  Bank  Act,  applies 
only  to  suits  for  penalty  of 
double  the  interest  paid,  and 
not  to  defense  of  usury  to  de- 
feat recovery  of  interest;  and 
it  begins  to  run  from  time  of 
payment.  22  App.  58  (3)  (95 
S.  E.  381). 

Set-off  not  allowed  as  to  al- 
ledged  interest  actually  paid 
national  bank,  as  the  only  rem- 
edy in  such  case  is  an  action 
of  debt  under  the  National 
Banking  Act  to  recover  twice 
the  amount  of  the  interest  paid. 
22  App.  58  (4)  (95  S.  E.  381). 

Payment  on  usurious  debt  to 
national  bank  applied  to  princi- 
pal, not  interest,  in  absence  of 
direction.  22  App.  58  (5)  (95 
S.  E.  381). 

Attorney's  fees  for  collec- 
tion, provision  for,  in  note  to 
national  bank,  not  usurious. 
22  App.  59  (6)  62  (95  S.  E. 
381). 

A  surety  or  guarantor  of  a 
debt  to  a  national  bank  is  not 
discharged  because  the  bank 
charged  or  received  usury.  12 
App.  472  (3)  (77  S.  E.  320)  ; 
22  Ga.  App.  58  (1)  (95  S.  E. 
381). 

See  Discount. 

Notary  Public. 

Notary  rightfully  employed 
by  bank,  bank  generally  not  li- 
able for  malicious  protest  made 
by ;  immaterial  that  notary  is 
also  employee  of  bank.  88/308 
(2,3)  (14  S.  E.  552). 

Notice  to  Officers  When  No- 
tice to  Bank. 

See   Cashier;    Directors; 
Messenger;  President. 


DIGEST  OF  DECISIONS. 


209 


Officers  of  Banks. 

See  Accountant  and  Gen- 
eral Manager;  Bond; 
Cashier;  Directors;  Na- 
tional Bank;  President. 

Partnership. 

That  checks  frequently  drawn 
by  partnership  to  discharge  in- 
dividual debts  of  its  members 
did  not  constitute  such  a  course 
of  dealing  as  would  justify 
bank  in  assuming  that  it  was 
within  scope  of  partnership 
business  to  give  its  note  in  sat- 
isfaction of  debt  due  by  one  of 
the  partners  to  the  bank.  1 147 
185  (3)  (39S.  E.920). 

Application  of  collections  on 
collateral  securities  for  debts  of 
partnership  to  debts  of  indi- 
vidual partners  unlawful.  101/ 
134  (28S.  E.  644). 

Pass  Book. 

Entry  on  pass  book  equiva- 
lent to  a  receipt  for  money,  and 
establishes  the  relation  of 
debtor  and  creditor  between  the 
bank  and  the  depositor.  58/62. 

Pass  book  given  to  depositor 
in  savings  bank,  entries  in 
which  are  shown  to  have  been 
made  by  officer  of  bank,  prima 
facie  evidence  that  bank  is  in- 
debted to  depositor  for  balance 
shown  by  book.  115/939  (42 
S.  E.269). 

Pass  book  not  conclusive  evi- 
dence of  amount  due  depositor. 
129/582  (3)  (59  S.  E.  291); 
21  Ga.  App.  183  (1)  (94  S.  E. 
90). 

Where  entry  in  pass  book 
purporting  to  show  that  owner 
of  book  had  credit  in  bank  for 
specified  balance  was  ab  initio 
false  and  third  person  contem- 
plating purchase  of  interest  in 
14 


owner's  business  applied  to 
banker  for  information  as  to 
genuineness  and  accuracy  of 
the  credit  and  the  truth  was 
concealed  from  him  and  he  was 
defrauded  and  suffered  loss, 
held  that  the  banker  was  liable 
in  damages  for  such  loss.  97 '/ 
673  (25  S.  E.  754). 
See  Savings  Bank. 

Post-Dated  Check. 
See  Check. 

President. 
Powers. 

The  president  of  a  bank  is  its 
chief  executive  officer,  and,  in 
the  absence  of  any  showing  to 
the  contrary,  will  be  presumed 
to  be  the  agent  in  charge  of  its 
affairs.  20  App.  35  (92  S.  E. 
394). 

President  of  bank  has  no 
power  to  bind  it,  except  in  dis- 
charge of  his  ordinary  duties; 
and  it  is  not  one  of  his  ordinary 
duties  to  release  debtors  of  the 
bank  from  payment  of  their  ob- 
ligations to  it.  3  App.  364  (5) 
(60  S.  E.  13). 

Ratification  of  unauthorized 
release  of  debtor  by  president 
relied  on,  specific  acts  of  ratifi- 
cation must  be  alleged;  if  ac- 
quiescence and  receiving  bene- 
fits relied  on  as  estoppel,  knowl- 
edge by  directors  and  benefits 
to  bank  must  be  alleged  and 
proved ;  delay  in  enforcing 
payment  does  not  show  ratifi- 
cation. 3  App.  365  (6)  (60  S. 
E.  13). 

Bank  president  negotiating  to 
third  person,  for  his  own  bene- 
fit, accommodation  note  pay- 
able to  cashier  and  indorsed  in 
blank,  not  notice  to  such  third 
person  of  impropriety  or  ille- 


210 


PARK'S  BANKING  LAW  OF  GEORGIA. 


gality  of  his  conduct.  99/258 
(1)  (25  S.  E.  620). 

President  of  bank,  even  if 
clothed  with  general  authority 
to  lend  its  money,  cannot  bind 
bank  by  lending  its  funds  to 
himself  or  to  the  cashier,  when 
latter  knows  that  the  loan  is 
made  for  the  president's  own 
benefit.  126/702,  709  (56  S. 
E.  55).  • 

Where  charter  provided  that 
contracts  should  not  bind  bank 
unless  signed  by  president  and 
countersigned  by  cashier,  presi- 
dent sued  on  his  indorsement 
of  bill  drawn  by  himself  as 
president  in  his  own  favor 
could  not  object  to  regularity 
of  contract,  nor  was  he  protect- 
ed on  his  indorsement  by  want 
of  conformity  to  the  charter. 
3/185  (3). 

Whether  or  not  note  fraudu- 
lently altered  by  inserting  after 
name  of  payee  the  letters  "Ft." 
as  abbreviation  of  "president," 
payment  to  that  person  dis- 
charged makers,  it  appearing 
that  even  treating  the  paper  as 
property  of  the  bank  of  which 
he  was  president,  he  had,  as 
such,  full  authority  to  collect 
the  paper  in  its  behalf .  110/780 
(1)  (36  S.  E.  201). 

Where  president  had  general 
authority  to  take  in  settlement 
of  paper  due  it  property  other 
than  cash,  his  so  doing  in  par- 
ticular instance  was  binding 
upon  bank.  110/780  (2)  (36 
S.  E.  201). 

President  has  inherent  power 
to  dismiss  suit  brought  by  bank, 
where  his  power  to  control  liti- 
gation by  bank  was  not  limited 
by  statute,  charter,  by-law,  or 
order  of  directors.  17  App. 
420  (1)  (87S.  E.  606). 


Notice  to. 

Notice  to  president  concern- 
ing untrustworthiness  of  cash- 
ier is  notice  to  bank,  unless 
president  is  accomplice  of  cash- 
ier. 93/503,509  (21  S.  E.65). 

While  generally  discounting 
of  bills  and  notes  is  not  within 
scope  of  duty  of  president  and 
therefore  notice  to  him  would 
not  generally  be  notice  to  bank 
in  relation  to  such  transactions, 
yet  where  it  appears  that  "offi- 
cers of  the  bank"  consulted  and 
acted  on  question  whether  note 
should  be  accepted  as  collat- 
eral, notice  to  any  of  such  offi- 
cers would  be  notice  to  bank, 
and  in  absence  of  proof  as  to 
what  officers  were  in  consulta- 
tion, it  might  be  inferred  that 
president  and  directors  were 
those  referred  to.  105/116 
(2),  121  (31  S.  E.  141). 

Knowledge  of  president  of 
bank  that  certain  stock  not  fully 
paid  up  imputable'  to  bank  if 
he,  acting  for  it,  accepted  trans- 
fer of  the  stock  to  it  and  it 
thereunder  retained  same.  110/ 
827  (3)  (36S.  E.  256). 

Bank  not  chargeable  with 
notice  of  facts  of  which  its 
president  acquires  knowledge 
while  dealing  in  his  private  ca- 
pacity with  third  persons;  nor 
is  knowledge  on  his  part  thus 
acquired  imputable  to  the  cor- 
poration when,  acting  through 
another  official,  it  deals  with 
him  at  arm's  length.  116/820 
(3)  (43  S.  E.  269) ;  22  App. 
693  (97  S.  E.  111). 

Depreciation  of  stock  held 
by  bank  as  collateral,  by  presi- 
dent and  stockholder,  with  view 
to  purchasing  controlling  in- 
terest in  corporation,  did  not- 


DIGEST  OF  DECISIONS. 


211 


without  more  render  bank  lia- 
ble in  damages.     68/637   (4). 
See  Cashier;  Deed. 

Ratification. 

A  bank,  by  bringing  action 
on  contract  made  in  its  behalf 
by  officer,  ratifies  his  action  in 
making  the  contract,  and  is 
chargeable  with  knowledge  of 
whatever  he  knew  at  the  time 
of  so  doing.  113/527  (2)  (38 
S.  E.  947). 

See  Cashier;  Directors; 
National  Bank;  Presi- 
dent. 

Savings  Bank. 

Whether  particular  bank  has 
shown  itself  to  be  a  savings 
bank  which  pays  interest  on  de- 
posits and  whose  deposits  are 
not  subject  to  check,  held  to  be 
question  for  jury.  1 14/788  ( 1 ) 
(40  S.  E.  825). 

"Subject  to  check"  means 
subject  to  payment  without  lim- 
itation or  restriction,  except 
that  the  check  must  be  present- 
ed on  banking  days  within 
banking  hours.  114/788  (2) 
(40S.E.  825). 

Savings  b  a'n  k  depositor 
bound  by  reasonable  rules  as- 
sented to  in  writing.  121/105 
(48  S.  E.  708)  ;  99  S.  E.  239 
(Ga.App.). 

Rule  that  payment  to  person 
presenting  pass  book  shall  be 
good,  unless  book  lost  and  writ- 
ten notice  given  to  bank  before 
payment,  is  reasonable.  121/ 
105  (48  S.  E.  708) ;  99  S.  E. 
239  (Ga.  App.). 

Where  person  other  than  de- 
positor presents  pass  book  with 
forged  check  bearing  signature 
similar  to  that  of  depositor  and 
there  is  nothing  to  put  teller  on 
inquiry  and  bank  in  good  faith 


pays  check,  it  is  not  liable.   12 1/ 
105  (48  S.  E.  708). 

That  depositor  is  unable  to 
write  and  signs  name  by  mark 
no  defense  to  enforcement  of 
this  rule.  -  App.  -  -  (99  S. 
E.  239). 

Principle  not  affected  by  an- 
other rule  prescribing  that  de- 
positors must  always  present 
pass  book  in  depositing  or  with- 
drawing money  and  that  if  not 
present  personally  properly 
executed  order  must  accom- 
pany book  in  case  of  with- 
drawal. 121/105  (48  S.  E. 
708). 

Gift  of  deposit  in  savings 
bank  consummated  by  delivery 
of  pass  book  to  donee,  with  in- 
tention to  give  deposits  repre- 
sented by  book,  accompanied 
by  appropriate  words  of  gift, 
without  an  assignment  or  trans- 
fer in  writing.  -  App.  - 
(99  S.  E.  160). 

A  pass  book  issued  by  a  sav- 
ings bank  is  the  record  of  the 
customer's  account  and  its  pro- 
duction authorizes  control  of 
the  deposit.  -  App.  —  (99  S. 
E.  160). 

Provisions  of  law  in  regard 
to  building  and  loan  associa- 
tions apply  to  savings  banks. 
§  2881,  Park's  Ann.  Code. 

Trust  company  powers  may 
be  acquired  by  savings  banks. 
§  2821,  Park's  Ann.  Code. 

See  Pass  Book. 

Set-Off. 

See    Deposit;    Directors; 
National  Bank. 

Stock. 
By-Law  Lien. 

By-law  asserting  lien  on 
stock  for  debts  due  company 


212 


PARK'S  BANKING  LAW  OF  GEORGIA. 


valid  as  between  corporators. 
1/43. 

Judgment  against  stockhold- 
er inferior  to  existing  by-law 
lien,  though  plaintiff  had  no  no- 
tice thereof  at  time  he  made 
loan,  secured  judgment,  or 
gave  notice  under  §  6036, 
Park's  Ann.  Code.  If  stock 
was  subject  to  lien  when  rights 
of  judgment  creditor  attached, 
and  notice  was  given  at  sheriff's 
sale,  purchaser  could  not  com- 
pel transfer  without  paying 
amount  due  company  by  stock- 
holder. 122/521  (2,  3)  (50  S. 
E.  279). 

Stock,  by-law  lien  on,  in- 
ferior to  lien  of  pledgee  bona 
fide  and  without  notice.  Notice 
given  at  pledgee's  sale  not  af- 
fect rights  of  purchaser.  1477 
150  (95  S.  E.  286) ;  —  App. 

—  (101  S.  E.  203). 

Notice  of  lien  given  in  face 
of  certificate,  transferee  takes 
subject  to  debt  due  by  stock- 
holder to  corporation  or  which 
may  become  due  before  cor- 
poration has  notice  of  transfer. 
120/575  (1,2)  (48  S.  E.  226). 

Where  no  reference  to  lien 
in  certificate  pledgee  or  trans- 
feree not  affected  by  terms  of 
by-law  of  which  he  had  no  no- 
tice; statement  in  certificate 
that  "same  transferable  only  on 
books  of  the  corporation"  not 
charge  transferee  with  notice. 
120/575  (3,  4)  (48  S.  E.  226) ; 

—  App.  --  (101  S.  E.  203); 
and  see  7  App.  472  (3)  (67  S. 
E.  205. 

A  bank,  the  charter  of  which 
provides  that  the  total  liability 
to  it  of  any  person  "for  bor- 
rowed money  *  *  *  shall 
at  no  time  exceed  one-tenth 
part  of  the  capital  stock  of  said 
bank  paid  in,"  and  also  declar- 


ing a  lien  on  the  stock  of  any 
stockholder  for  any  indebted- 
ness due  it  by  such  stockholder 
which  shall  be  superior  to  all 
other  liens,  has  by  virtue  of  its 
charter,  a  lien  of  highest  dig- 
nity upon  the  stock  of  a  stock- 
holder to  an  amount  not  ex- 
ceeding ten  per  cent,  of  the 
capital  stock  of  the  bank  actu- 
ally paid  in,  notwithstanding  it 
may  have  violated  the  terms  of 
its  charter  by  loaning  to  such 
stockholder  a  sum  largely  in 
excess  of  that  which  it  was 
thereby  authorized  to  permit 
him  to  borrow.  116/820  (1) 
(43  S.  E.  269). 

When  stock  of  bank  pro- 
vides that  no  assignment  of 
stock  shall  be  valid,  as  against 
it,  unless  a  formal  transfer  of 
the  same  be  made  on  its  books, 
it  has  the  right  to  treat  stock- 
holder as  true  owner,  and  deal 
with  him  accordingly,  until  it 
receives  notice  of  the  assign- 
ment, aliter,  after  notice  is 
brought  home  to  the  bank,  even 
though  there  has  been  no  at- 
tempt on  his  part  to  secure  a 
formal  transfer  of  the  stock 
upon  its  books.  116/820  (2) 
(43  S.  E.  269). 

By-law  lien  not  attach  to 
stock  assigned  with  knowledge 
of  president  and  directors  for 
indebtedness  to  bank  incurred 
subsequently  by  original  hold- 
er. 21  App.  620  (4)  (94  S.  E. 
819). 

Lien  of  mortgage  on  stock 
is  inferior  to  by-law  lien  on 
such  stock  where  debt  secured 
by  by-law  lien  was  incurred  be- 
fore notice  to  the  bank  of  the 
mortgage  of  the  stock  even 
though  debt  to  bank  was  cre- 
ated subsequent  to  mortgage. 
Record  of  mortgage  is  not  no- 


DIGEST  OF  DECISIONS. 


213 


tice  to  the  bank.     22  App. 
(97  S.  E.  107). 

Transfer. 

Right  of  buyer  at  execution 
sale  to  have  transfer  of  stock 
on  books.  147/750  (95  S.  E. 
286). 

Illegal  refusal  of  bank  to 
transfer  stock  on  books  of  the 
corporation  to  owner  and  hold- 
er of  certificate  renders  bank 
liable  for  resulting  damages. 
Existence  of  by-law  lien  no  de- 
fense against  transferee  with- 
out notice.  -  App.  —  (101 
S.  E.  203). 

See  National  Bank. 

Stockholders  —  Individual 
Liability  of. 

In  General. 

Prior  to  1893  there  was  no 
general  law  declaring  individual 
liability  of  stockholders  in 
banks,  and  whether  such  liabil- 
ity existed  depended  upon  -pro- 
visions of  charter  in  given  case. 
125/710  (3)  (54  S.  E.  626)  ; 
and  see  123/787  (51  S.  E. 
770);  147/548  (94  S.  E. 
1025). 

Provisions  of  Act  of  1894 
that  individual  liability  of 
stockholders  shall  .be  considered 
an  asset  of  the  bank  and  in- 
forced  by  the  receiver  applica- 
ble to  bank  previously  char- 
tered. 148/663  (98  S.  E.  86) ; 
106/556  (32S.  E.  647  (2). 

Amount  of  individual  liabil- 
ity of  all  stockholders  limited 
in  charter  to  their  stock  and 
equal  additional  amount  of 
money,  and  whole  stock 
amounting  only  to  $50,000, 
creditors  cannot  collect  more 
than  that  sum  from  all  nor 
from  any  one  more  than  his 


equal  and  ratable  share.     99/ 
801  (5)  (27  S.  E.  790). 

Holders  of  certificates  of  de- 
posit are  depositors  within  the 
provision  of  a  bank  charter  im- 
posing on  stockholders  a  statu- 
tory liability,  in  addition  to  the 
full  payment  of  the  amount  of 
their  subscriptions,  for  the  pay- 
ment of  depositors.  141/227, 
228  (6)  (SOS.  E.  1085). 

Interest,  plaintiff  seeking  to 
enforce  individual  liability  of 
stockholders,  entitled  to,  from 
date  of  suit.  125/710  (18)  (54 
S.  E.  626). 

Stockholder  of  bank  sued  on 
his  ultimate  liability  on  bills  of 
bank  liable  for  interest  only 
from  time  of  demand  of  pay- 
ment made  on  him.  10/162 
(2). 

Interest  will  be  added  to  the 
principal  of  the  deposit,  not 
exceeding  the  statutory  limit, 
in  an  action  to  enforce  the  stat- 
utory liability  of  stockholders 
for  the  payment  of  depositors. 
141/227,  228  (7),  (80  S.  E. 
1085). 

Interest  begins  to  run  on  de- 
posits subject  to  check  from  the 
date  of  the  bank's  insolvency 
and  appointment  of  a  receiver. 
141/227,  228  (7)  (80  S.  E. 
1085). 

Property,  individual,  of 
stockholders  made  liable  by 
charter  for  ultimate  payment 
of  debts,  liability  is  imposed 
which  may  result  in  personal 
judgment  binding  all  of  the 
stockholder's  property  at  date 
of  judgment  and  any  that  may 
be  thereafter  acquired;  not 
necessary  to  allege  in  petition 
that  stockholder  had  property, 
or  of  what  his  property  con- 
sisted. 125/710  (23),  (54  S. 
E.  626). 


214 


PARK'S  BANKING  LAW  OF  GEORGIA. 


Value  of  stock  to  be  esti- 
mated according  to  valuation 
placed  on  it  by  charter,  where 
charter  provided  that  stock- 
holders should  be  individually 
liable  in  proportion  to  amount 
of  shares  held  by  each  and 
value  thereof.  10/162  (3)  ; 
11/459  (3). 

Directors  made  liable  by 
charter  for  overissue  of  bank 
notes,  individual  liability  of 
stockholders  was  not  secondary 
and  collateral  to  that  of  direc- 
tors. 18/444  (3). 

Liability  of  stockholders  un- 
der charter  arises  when  bank 
refuses  or  ceases  to  redeem 
bills  and  is  notoriously  and  con- 
tinuously insolvent.  92  U.  S. 
156  (23  L.Ed.  537). 

Proportion  to  amount  of 
shares  and  value  thereof,  where 
stockholders  bound  in,  for  ulti- 
mate redemption  of  bills  of 
bank,  held  that  aggregate  body 
of  stockholders  is  bound  for 
all  the  bills  issued  by  the  bank 
and  that  as  whole  capital  stock 
is  to  entire  outstanding  circula- 
tion, so  is  each  stockholder's 
share  to  his  part  to  be  re- 
deemed. 19/338  (5)  ;  see  19/ 
325  (4);  16/217  (4). 

Creditor  may  recover  entire 
debt  out  of  one  stockholder 
provided  the  debt  does  not  ex- 
ceed his  proportion  of  entire 
indebtedness  of  company,  the 
individual  liability  of  the  char- 
ter providing  that  stockholders 
shall  be  liable  pro  rata  for 
debts  of  company  to  amount  of 
stock  they  respectively  hold. 
56/563  (4). 

Transfer  of  stock  by  stock- 
holder on  transfer  book  of  bank 
is  evidence  against  him  that  he 
once  owned  stock  to  amount 
transferred.  20/275  (1). 


In  action  against  stockhold- 
er, transfer  made  on  books  by 
cashier,  defendant  being  mem- 
ber at  time  and  free  access  se- 
cured to  him,  is  prima  facie 
evidence  of  his  ownership  of 
the  shares.  11/461  (16). 

Evidence  of  declarations  of 
officers  and  agents  of  bank  not 
competent  in  fixing  ownership 
of  stock.  19/338  (6). 

Mere  fact  that  no  certificate 
was  to  be  issued  to  subscriber 
for  part  of  the  stock  for  which 
he  subscribed  did  not  prevent 
him  from  being  stockholder  of 
the  entire  number  of  shares, 
nor  relieve  him  from  liability 
as  a  stockholder.  140/625,  631 
(79  S.  E.  536). 

Transfer  of  stock  in  bank 
here,  though  made  after  failure 
of  bank,  did  not  prevent  trans- 
feree from  being  stockhold- 
er, and  as  such  from  being  lia- 
ble under  bank's  charter.  26/ 
17(5). 

Charter  providing  that  "indi- 
vidual property  of  stockholders 
at  the  time  of  suit  shall  be  lia- 
ble for  the  ultimate  payment  of 
debts  of  company  in  proportion 
to  amount  owned  by  each" 
makes  liable  only  those  who  are 
stockholders  at  the  time  suits 
brought  against  company  by 
creditors.  125/710  (1-7)  (54 
S.  E.  626)  overruling  cases 
above  cited  so  far  as  conflict- 
ing; see  also  192  U.  S.  386  (48 
L.Ed.  491,  24  Sup.  Ct.  314). 

Charter  providing  that  stock- 
holders should  be  individually 
liable  "to  the  extent  of  the 
amount  of  their  stock,  at  the 
par  value  thereof,  respectively, 
at  the  time  the  debt  was  cre- 
ated, in  addition  to  the  amount 
invested  in  such  shares,"  held 
that  stockholder  was  individu- 


DIGEST  of  DECISIONS. 


215 


ally  liable  for  his  pro  rata  part 
of  debts  created  before  he  ac- 
quired his  shares  by  transfer  as 
well  as  for  like  part  of  those 
created  during  his  ownership 
of  the  shares ;  and  that  he  was 
also  liable  for  debts  created 
after  he  transferred  his  shares, 
unless  he  gave  notice  of  trans- 
fer as  prescribed  in  §  1496  of 
Code  of  1882,  which  was  of 
force  at  the  time.  99/801  (3, 
4)  27  S.  E.  790),  affirming  95/ 
505  (22  S.  E.  277). 

Pledgee  holding  bank  stock 
as  collateral  not  liable  as  stock- 
holder for  bank's  indebtedness 
created  after  stock  re-trans- 
ferred on  books  on  payment  of 
loan,  though  pledgee  failed  to 
give  notice  as  required  by  § 
1496  of  Code  of  1882,  stock- 
holder's individual  liability  un- 
der charter  being  limited  to  par 
value  of  his  stock  at  time  debt 
created.  192  U.  S.  386  (48  L. 
Ed.  491,24  Sup.  Ct.  314). 

Collateral  security,  where 
stock  transferred  as,  individual 
liability  under  charter  attached 
to  transferee  as  well  as  to  one 
who  purchased  stock  outright. 
99/801  (2)  (27S.  E.  790). 

Individual  liability  under  Act 
of  1893  not  confined  to  original 
subscribers  or  purchasers  of 
stock  from  the  corporation,  but 
extends  to  transferees  of  such 
stockholders.  147/548  (94  S. 
E.  1025). 

One  holding  stock  in  an  in- 
solvent bank  as  life  tenant  is 
subject  to  the  individual  liabil- 
ity imposed  by  statute  upon 
stockholders  for  the  benefit  of 
depositors.  22  App.  203  (95 
S.  E.  756). 

Discharge  of  Liability. 

Stockholder  is  discharged 
when  he  has  once  paid  the 


amount  for  which  he  is  liable 
under  charter.  18/67  (15), 
109,  110;  16/217  (4);  53/502. 

Stockholder  sued  on  indi- 
vidual liability  may  defend  by 
showing  that  before  beginning 
of  suit  he  paid  other  depositors 
than  plaintiff  an  amount  equal 
to  full  proportion  his  stock 
bears  to  whole  amount  due  de- 
positors. Suit  cannot  be  de- 
feated by  paying  to  other  de- 
positors than  plaintiff  after  suit 
begun.  Evidence  to  prove  pay- 
ment. 42/575;  40/392. 

Assignee  chosen  by  corpora- 
tion and  over  whom  corpora- 
tion had  coordinate  control 
with  creditors,  not  proper  to 
prove  in  order  to  screen  stock- 
holder from  liability, that  assets 
sufficient  to  pay  creditor  were 
turned  over  to.  19/338  (7). 

Suit  on  notes  of  bank 
brought  against  stockholder  in- 
dividually liable,  held  that 
stockholder  would  be  estopped 
to  deny  that  there  had  been 
compliance  with  terms  of  char- 
ter or  that  bank  had  never  been 
legally  organized  and  had  no 
authority  to  contract.  18/444 
(2). 

Stockholder  who  participated 
in  illegal  organization  of  bank 
cannot,  under  individual  liabil- 
ity clause,  maintain  suit  upon 
unpaid  bills  of  bank  against  an- 
other stockholder ;  evidence 
admissible  to  show  fraudulent 
manner  in  which  bank  put  into 
operation.  19/337  (1);  see 
18/411. 

Director  of  bankrupt  bank 
cannot  buy  up  claims  against 
the  bank  at  a  discount  and  en- 
title himself  to  credit  therefor 
at  full  face  value  in  settlement 
with  creditors  on  his  personal 
liability ;  at  least,  he  cannot  do 


216 


PARK'S  BANKING  LAW  OF  GEORGIA. 


this  so  as  to  defeat  action 
brought  before  such  claims  ac- 
tually applied.  Where  stock- 
holder sued  as  such  and  he  de- 
fends on  such  claims,  his  legal 
disability  as  director  to  pur- 
chase at  discount  may  be  urged 
by  plaintiff  without  any  allega- 
tion in  pleadings.  60/174. 

Settlement  made  by  bill- 
holder  with  stockholder, 
amount  received  not  material 
to  ascertainment  of  proportion- 
ate liability  of  another  stock- 
holder. 20/276  (7). 

Stockholders  not  relieved  of 
liability  to  assessment  to  pay 
debts  of  national  bank  by  deliv- 
ery of  stock  certificates  to  cash- 
ier as  vendee  where  transfer 
not  actually  made.  146/55  (90 
S.  E.  467). 

Stockholder  is  relieved  of 
liability  to  assessment  to  pay 
debts  of  national  bank  by  deliv- 
ery of  stock  certificate  contain- 
ing transfer  signed  in  blank  to 
cashier  as  vendee  with  instruc- 
tions to  fill  blank  and  enter 
transfer  on  books  of  bank,  al- 
though transfer  not  actually 
made,  where  cashier  is  only  of- 
ficer of  bank  whose  duty  it  was 
to  make  such  transfer.  20  App. 
767  (93  S.  E.  284). 

Enforcement  of  Liability. 

Not  necessary  before  suing 
stockholders  on  individual  lia- 
bility for  ultimate  redemption 
of  bills  of  bank,  to  exhaust  as- 
sets of  bank  by  legal  proceed- 
ings. 92  U.  S.  156  (23  L.  Ed. 
537). 

Petition  need  not  show  char- 
acter of  debt  on  which  judg- 
ment founded  or  other  particu- 
lars in  reference  thereto. 
Stockholder  is  let  into  all  de- 
fenses appropriate  to  one  in  his 


position  and  also  to  all  de- 
fenses corporation  might  have 
set  up  in  suit  against  it.  125/ 
710  (8-12)  (54  S.  E.  626)  and 
citations. 

Judgment  against  corpora- 
tion in  favor  of  creditor  not 
conclusive  against  stockholder 
in  suit  to  enforce  individual  lia- 
bility. Such  judgment  estab- 
lishes prima  facie  amount  and 
validity  of  debt.  When  stock- 
holder not  party  to  suit  against 
corporation  and  had  no  notice 
or  opportunity  to  defend  in 
that  suit,  he  may,  in  suit  against 
himself,  set  up  not  only  any 
fact  which  would  absolve  him 
under  charter,  but  any  fact 
which  would  negative  liability 
of  corporation.  In  suit  against 
stockholder  it  is  only  necessary 
to  allege  that  judgment  has 
been  rendered  against  corpora- 
tion; judgment,  fi.  fa.  and  re- 
turn of  nulla  bona  in  suit 
against  corporation,  was  suffi- 
cient to  authorize  billholder  of 
bank  to  proceed  against  stock- 
holder personally.  11/459(3); 
see  16/217  (3). 

Judgment  and  execution  un- 
satisfied are  evidence  of  insol- 
vency; fact  may  be  estab- 
lished, however,  by  other  evi- 
dence, as  for  example,  by  as- 
signment and  continued  sus- 
pension of  business,  or  by  other 
notorious  indications.  92  U.  S. 
156  (23  L.  Ed.  537). 

Ultimate  liability  of  share- 
holders as  fixed  by  charter  here 
did  not  attach  to  judgment 
against  corporation  but  to  the 
bank  bills;  and  when  such  lia- 
bility sought  to  be  enforced, 
bills  had  to  be  set  out  and  de- 
scribed notwithstanding  prior 
judgment  or  decree  for  their 
payment  had  been  rendered 


DIGEST  OF  DECISIONS. 


217 


against  corporation  or  its  as- 
signee. 61/613  (3)  ;  dis- 
tinguished in  125/710,  725  (54 
S.  E.  626). 

Action  by  receivers  of  bank 
against  stockholders  held  here 
not  to  have  been  prematurely 
brought,  though  all  the  assets 
of  the  corporation  had  not  been 
exhausted.  141/227,  228  (5) 
(80  S.  E.  1085). 

Authority  from  creditors  to 
sue,  receiver  not  required  to 
show.  125/710  (21)  (54  S.  E. 
626). 

Proceedings  under  which  re- 
ceiver appointed  need  not  be 
exhibited  with  petition  ;  allega- 
tions describing  petition  suffi- 
cient. 125/710  (22)  (54  S.  E. 
626). 

Courts  of  law  have  jurisdic- 
tion on  proper  petition  and 
proof  to  render  judgment  in 
suit  on  stockholder's  liability. 
106/556  (5)  (32  S.  E.  647)  ; 
see  19/325. 

Parties  defendant,  all  stock- 
holders may  be  joined  as.  in 
one  action  by  receiver  under- 
taking to  collect  from  stock- 
holders on  their  individual  lia- 
bility. Corporation  not  neces- 
sary party  defendant.  106/556 
(3,  4)  (32  S.  E.  647)  ;  see  also 
95/505  (2)  (22  S.  E.  277). 

In  suit  to  enforce  individual 
liability,  allegations  that  some 
are  dead,  some  beyond  juris- 
diction, and  that  others  are  de- 
funct corporations  set  forth 
sufficient  reasons  for  omitting 
certain  stockholders  as  parties 
defendant.  125/7 '10  (24)  (54 
S.  E.  626)  ;  see  95/505  (2) 
(22  S.  E.  277). 

In*  suit  to  enforce  stockhold- 
ers' individual  liability  to  de- 
positors, all  the  stockholders  so 


liable  may  be  joined  in  one  ac- 
tion. 148/663  (98S.  E.  86). 

In  a  suit  of  the  character 
just  indicated,  (a)  no  demand 
by  depositors  as  a  condition 
precedent  to  suit  is  necessary ; 
(b)  the  liability  of  the  stock- 
holders need  not  be  actually 
fixed  and  determined;  (c)  the 
assets,  legal  and  equitable,  of 
the  corporation  need  not  have 
been  first  completely  exhaust- 
ed; and  (d)  the  action  to  en- 
force the  statutory  liability  of 
the  stockholders  may  be 
brought  at  any  time  within 
twenty  years  after  the  right  of 
action  accrues.  148/663  (98 
S.  E.  86). 

Stockholder  assessed  by 
Comptroller  of  Currency  for 
debt  of  insolvent  national  bank 
can  not  collaterally  attack  order 
of  assessment.  146/118  (90  S. 
E.  965). 

Limitation  period  of,  for  en- 
forcing individual  liability  of 
stockholders  is  twenty  years. 
Where  charter  provides  that  in- 
dividual property  of  stockhold- 
ers "at  time  suit  is  filed"  shall 
be  liable  for  debt  of  corpora- 
tion, period  begins  to  run  upon 
filing  of  such  suit.  125/710 
(19,  20)  (54  S.  E.  626;  148/ 
663  (98S.  E.  86). 

Statute  of  limitations  begins 
to  run  on  individual  liability  of 
stockholders  to  redeem  bills  of 
bank  from  time  when  bank  re- 
fuses or  ceases  to  redeem  bills 
and  is  notoriously  and  continu- 
ously insolvent.  92  U.  S.  156 
(23  L.  E.  537)  ;  see  95  U.  S. 
628  (24  L.  Ed.  365)  ;  see  88 
Fed.  607;  s.  c.,  99  Fed.  635,  40 
C.  C.  A.  22. 

Distribution  of  assets  of  in- 
solvent bank,  rule  of,  with  re- 
gard to  stockholders  individu- 


218 


PARK'S  BANKING  LAW  OF  GEORGIA. 


ally  liable  under  charter.  40/ 
392  (5,6). 

Stock  assessment  where  capi- 
tal impaired,  binding;  notice 
by  Assistant  State  Bank  Ex- 
aminer sufficient.  147/636  (95 
S.  E.  222). 

See  Insolvency. 

Stopping  Payment. 

See  Check. 
Surety. 

See  Guaranty. 

Taxation. 

State  bank  is  subject  to  spe- 
cial license  or  business  tax 
levied  by  State  or  municipality. 
60/133. 

No  injunction  against  arbi- 
tration of  tax  return  on  suit  of 
person  showing  no  interest. 
147/62  (92  S.  E.  871). 

See  National  Banks. 

Telegram. 

Probability  that  drawer  of 
check  will  request  drawee  to 
withhold  payment  when  in- 
structed so  to  do  by  payee,  and 
that  drawee  will  comply  with 
such  request,  is  so  legally  cer- 
tain as  to  support  action  for 
damages  against  telegraph  com- 
pany for  failure  to  deliver  mes- 
sage from  payee  to  drawer, 
containing  such  instruction.  10 
App.  716(4)  (74S.  E.  78). 

Trust  Company. 

Provision  of  §  2817  (12), 
Park's  Ann.  Code,  is  legislative 
declaration  that  company  or- 
ganized under  the  act  is  not  to 
be  regarded  as  a  bank  unless  it 
applies  for  and  has  granted  to 
it  a  charter  as  a  bank.  13  App. 
314  (6)  (79  S.  E.  170). 


Trust  company  incorporated 
under  §  2815,  et  seq.  of  Park's 
Ann.  Code  is  not  a  chartered 
bank,  though  it  exercises  as  an 
incident  to  the  main  object  of 
its  creation  power  to  receive 
trust  funds  on  deposit  and 
power  to  lend  money.  13  App. 
314  (4,5)  (79  S.  E.  170). 

Trust  company  may  obtain 
charter  as  bank,  and,  after  hav- 
ing done  so,  may  exercise,  in 
addition  to  its  other  powers,  all 
the  functions  of  a  bank.  13 
App.  314  (7)  (79S.  E.  170). 

See  Savings  Bank. 

Trustee. 

Trustee  depositing  trust 
money  to  his  credit  as  agent 
may  sue  for  it  as  trustee.  88/ 
333  (1)  (14  S.  E.  554). 

Check  signed  by  trustee  as 
agent  and  presented  by  payee  is 
sufficient  demand  for  repay- 
ment of  deposit,  and  upon  re- 
fusal to  pay,  trustee's  right  of 
action  becomes  complete.  88/ 
333  (2)  (14S.  E.  554). 

Not  a  conversion  for  trustee 
to  deposit  trust  money  to  his 
credit  as  agent,  though  bank 
may  have  knowledge  of  the 
trust.  88/333  (4)  (14  S.  E. 
554). 

Deposit  by  administrator  not 
properly  made  when  in  indi- 
vidual name  followed  merely 
by  "adm'r :"  such  deposit  treat- 
ed as  individual  deposit,  ren- 
dering the  depositor  individu- 
ally liable  for  money  of  estate 
so  deposited,  when  lost  by  fail- 
ure of  bank.  19  App.  74  (90 
S.  E.  973). 

Payment  by  bank  to  trustee 
on  his  checks  will  discharge  it, 
whether  checks  signed  with 
designation  of  trustee  or  not. 
88/335  (5)  (14  S.  E.  554). 


DIGEST  OF  DECISIONS. 


219 


Bank  not  liable  to  trustee 
upon  contract  of  deposit,  where 
he  checked  out  trust  funds  for 
his  own  benefit  with  bank's 
knowledge.  If  party  to  misap- 
plication of  trust  funds,  bank 
liable  to  beneficiaries  on  their 
equitable  title,  not  on  contract 
of  deposit  with  trustee.  94/ 
356  (21  S.  E.  575). 

Generally  bank  may  assume 
that  trustee  will  apply  trust 
money  deposited  to  its  proper 
purposes  and  is  not  accountable 
for  misappropriation,  but  it  can 
not  knowingly  appropriate  to 
satisfaction  of  debt  due  it  by 
another  trust  funds  deposited 
with  it  by  him  after  creation  of 
debt.  102/202  (29  S.  E.  182). 

Bank  having  notice  that 
breach  of  trust  is  being  com- 
mitted by  improper  withdrawal 
of  funds  is  liable.  Where  funds 
alleged  to  have  been  diverted 
were  assets  of  insolvent  cor- 
poration deposited  by  receiver 
under  order  of  court  providing 
that  funds  should  be  paid  out 


only  on  checks  signed  by  re- 
ceiver and  countersigned  by 
judge,  and  bank  had  notice  of 
order,  creditors  of  corporation 
could  enforce  liability  of  bank 
incurred  by  paying  out  funds 
upon  checks  not  countersigned 
as  provided.  129/126  (58  S. 
E.  867). 

Where  bankers  loaned  money 
as  agents  of  a  customer,  fact 
that  trustee  to  whom  money 
loaned  deposited  it  in  the  bank 
and  afterwards  drew  checks 
upon  it  for  his  own  use  with 
the  knowledge  of  the  bankers, 
did  not  affect  their  former  prin- 
cipal. 66/638  (3-a). 

Usury. 

Receiving  interest  in  advance 
by  a  bank  at  the  highest  legal 
rate  of  interest  on  a  loan, 
whether  it  be  a  short  or  a  long 
time  loan,  is  usurious.  143/ 
302. 

See  National  Bank;  Dis- 
count. 


PART  III. 

Opinions  of  the  General  Counsel  of  the 

Georgia  Bankers*  Association, 

1910-1920. 


FOREWORD. 

Since  1910,  as  General  Counsel  of  the  Georgia  Bankers'  Asso- 
ciation, there  have  been  submitted  to  me  by  members  of  the  As- 
sociation numerous  questions  of  banking  law,  negotiable  instru- 
ments, and  allied  subjects.  The  questions  have  come  in  the  form 
of  letters,  asking  my  opinion  on  statements  of  fact  more  or  less 
complicated.  To  these  letters  I  have  replied,  endeavoring  to  base 
my  answer  upon  recognized  authorities  from  which  I  have  often 
quoted.  I  have  not  undertaken,  however,  more  than  a  simple 
statement  of  the  law  as  I  understood  it,  my  purpose  being  to  give 
to  the  inquirer  an  opinion  upon  which  he  could  act  rather  than  to 
encumber  it  with  a  citation  of  authority  or  with  a  discussion  of 
the  principles  of  law  upon  which  the  opinion  was  based. 

Three  little  volumes  of  these  opinions  were  published  by  the 
Association  and  distributed  to  its  members.  More  recently  a  con- 
siderable number  of  them  have  been  published  in  The  Southern 
Banker,  Atlanta,  Georgia.  From  the  large  number  of  these  opin- 
ions published  and  unpublished  I  have  endeavored  to  select  those 
which  appeared  to  me  of  more  general  interest  and  which  are  still 
applicable,  notwithstanding  the  changes  in  the  law. 

For  the  topics  discussed  I  have  no  apology.  They  were  selected 
by  the  bankers  themselves,  who  desired  assistance  on  problems 
which  confronted  them.  The  opinions  do  not  constitute  a  sys- 
tematic treatise  on  banking  law,  but  attempt  to  give  practical  an- 
swers to  practical  questions  arising  in  actual  experience  of  Georgia 
Bankers.  In  preparing  the  manuscript  for  publication  little  has 
been  done  save  to  reduce  the  letters  of  inquiry  to  the  form  of 
questions,  and  the  replies,  to  answers  to  these  questions,  eliminat- 
ing as  far  as  possible  specific  facts  and  names  so  as  to  make  the 
opinions  general  and  impersonal. 

The  manuscript  was  prepared  by  direction  of  the  Executive 
Council  of  the  Georgia  Bankers'  Association,  it  being  intended  to 
publish  and  distribute  the  book  among  the  members  of  the  Asso- 
ciation, as  had  been  done  with  the  previous  publications.  Having 

221 


222  FOREWORD. 

undertaken  to  annotate  the  Banking  Law,  it  was  decided  to  in- 
clude the  opinions  in  the  same  volume. 

Lawyers  do  not  need  to  be  cautioned,  but  bankers  may,  that 
these  opinions,  while  for  the  most  part  based  on  authority,  are 
nevertheless  the  opinions  of  a  lawyer.  Whether  the  Courts  would 
reach  the  same  conclusion  on-  the  same  state  of  facts,  no  one  can 
say.  And  the  layman  should  also  bear  in  mind  that  a  slight  change 
in  the  facts  often  makes  the  greatest  difference  in  the  application 
of  legal  principles.  O.  A.  P. 


ACCOMMODATION  INDORSERS. 


Are  Discharged  by  Extension  Except  by  Consent. 

The  maker  of  a  note  indorsed  by  two  accommodation  indorsers  applies 
for  an  extension,  stating  that  the  indorsers  have  agreed  to  the  extension. 
The  extension  is  made  and  interest  paid.  Before  the  expiration  of  the  ex- 
tension the  maker  fails.  Are  the  indorsers  discharged? 

This  would  depend  on  whether  or  not  they  were  parties  to  the 
extension.  The  general  rule  is  that  any  act  which  would  change 
the  contract  of  an  accommodation  indorser  releases  him  from 
liability.  An  extension  of  time  to  a  definite  date  at  the  instance 
of  the  maker  would  be  such  a  chance  in  the  contract.  Bunn  v. 
Commercial  Bank,  98  Ga.  647.  It  would  increase  the  risk  of  the 
sureties,  or  at  least  might  have  that  effect,  and  they  would  not  be 
bound.  Of  course,  if  the  maker's  statement  is  correct,  and  it 
can  be  proved  that  the  indorsers  agreed  to  the  extension,  they 
would  not  be  released,  since  no  man  can  complain  of  an  act  to 
which  he  himself  has  assented. 


AGENCY. 


Bank  Must  Look  to  Authority  of  Agent  to  Indorse  Checks. 

A  bank  cashed  a  check  indorsed  by  an  agent  of  the  payee.  The  agent 
had  acted  as  such  for  some  time  and  it  was  customary  for  him  to  collect 
for  his  principal.  The  agent  appropriated  the  proceeds  of  this  check  to  his 
own  use.  Is  the  bank  liable  to  the  principal? 

The  rule  is,  that  "when  a  bank  pays  a  check  indorsed  by  an 
agent  it  must  assure  itself  of  his  authority  or  accept  the  conse- 
quences of  acting  without  sufficient  knowledge,  as  his  authority 
to  indorse  can  be  implied  only  when  such  action  is  needful  to 
perform  the  duties  of  his  agency  effectively.  In  other  cases  it 
must  be  clearly  known  to  yield  the  paying  bank  perfect  protec- 
tion." Bolles  Modern  Law  of  Banking,  p.  730. 

If  it  was  customary  for  the  agent  to  collect  for  the  principal, 
the  bank  would  be  protected  in  paying  the  check  on  his  indorse- 

223 


224  PARK'S  BANKING  LAW  of  GEORGIA. 

ment,  and  the  principal  would  be  estopped  from  setting  up  his 
want  of  authority.  The  length  of  time  during  which  he  had 
acted  for  his  principal  and  the  amount  of  business  of  this  char- 
acter done  by  him  would  have  a  material  bearing  on  the  question. 
If  it  was  customary  for  him  to  indorse  checks  payable  to  his 
principal  and  this  custom  had  continued  for  a  considerable  period 
so  as  to  be  well  known  to  the  principal,  the  latter  could  not  set  up 
his  want  of  authority.  Of  course,  if  this  was  the  first  transaction 
of  the  kind  or  if  the  agent  had  only  cashed  a  few  checks  in  this 
way  and  his  principal  could  not  be  fairly  chargeable  with  knowl- 
edge, the  rule  would  be  different. 


Deposit  in  Name  of  Agent;    Liability  of  Bank  to  Principal. 

Can  a  traveling  salesman,  having  authority  to  indorse  and  collect  checks 
in  favor  of  his  house,  place  such  checks  to  his  own  account  and  send  his 
checks  to  the  house? 

An  agent  or  traveling  salesman,  having  authority  from  his 
company  to  collect  and  indorse  checks,  unless  there  are  some  re- 
strictions on  his  authority  as  to  the  purpose  for  which  collection 
or  indorsement  can  be  made  or  on  the  manner  in  which  he  can 
handle  the  funds  of  the  company  which  he  represents,  can  law- 
fully deposit  such  checks  to  his  own  credit,  especially  where 
checks  on  his  own  account  are  sent  to  the  company.  The  receipt 
by  the  company  of  the  checks  and  cashing  same  without  objec- 
tion would  be  a  ratification  of  the  act  of  the  salesman  in  deposit- 
ing, even  though  he  had  no  authority  to  make  deposit  to  his  own 
credit. 

But  while  a  salesman  or  agent  may  have  the  authority  so 
to  deposit  checks  payable  to  the  company,  and  while  the  bank 
would  be  protected  in  crediting  his  personal  account  with  them 
where  they  are  properly  indorsed  in  accordance  with  the  authority 
given  him,  the  practice  is  not  to  be  commended  and  is  a  very  dan- 
gerous one.  It  is  so^easy  to  mix  the  funds  of  the  company  and 
those  of  the  salesman  and  the  temptation  to  use  the  company's 
money  for  his  own  purposes  is  so  great  that  the  practice  should 
be  discouraged. 

In  fact,  unless  the  company  authorized  the  deposit  either  in  its 
instructions  to  the  salesman  or  by  permitting  it  to  be  done  and 
accepting  checks  without  question,  I  should  be  inclined  to  refuse 
to  handle  the  account  in  that  way.  This  is  not  only  best  for  the 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  225 

bank  but  for  the  salesman  also ;  for  where  he  mingles  the  funds 
of  his  principal  with  his  own,  the  principal  would  be  entitled  to 
hold  the  entire  deposit  if  the  funds  could  not  be  separated.  Of 
course  if  the  bank  has  any  reason  to  suspect  that  the  agent  is 
using  the  company's  money  for  his  own  benefit,  it  could  not  ac- 
cept the  deposit  of  the  company's  money  for  the  account  of  the 
agent  without  becoming  liable  as  assisting  him  in  misappropriat- 
ing funds. 


Deposit  in  Name  of  Agent;    Liability  of  Principal  for 

Overdraft. 

The  agent  of  a  corporation,  contrary  to  instructions  from  his  superior 
officers,  opens  an  account  with  a  bank  under  his  own  name  as  manager, 
deposits  checks  payable  to  the  company  to  the  credit  of  this  account  for 
several  months,  and  draws  checks  in  favor  of  the  employees  of  the  com- 
pany and  other  expense  items  against  this  account.  An  overdraft  is  cre- 
ated, which  the  company  refuses  to  pay  because  the  agent  had  no  authority 
to  open  the  account,  and  because  the  bank  was  not  authorized  to  allow 
an  overdraft.  Can  the  company  be  required  to  pay  the  overdraft? 

Since  an  overdraft  is  simply  a  loan  by  a  bank  to  the  customer 
whose  checks  are  paid,  the  question  is  whether  or  not  the  agent  in 
this  instance  had  the  authority  to  make  the  loan.  It  appears  that 
he  had  no  express  authority  for  this  purpose,  a»d  in  fact  that  he 
was  violating  his  instructions  when  he  did  business  with  the 
bank.  However,  if  it  can  be  shown  that  the  company  knowingly 
got  the  benefit  of  the  money  which  was  paid  out  on  these  checks, 
it  would  be  liable  for  money  advanced  for  its  use  and  benefit.  It 
could  not  plead  want  of  authority  in  its  agent  to  make  the  loan, 
where  the  money  was  actually  used  in  its  own  business,  and  it  re- 
ceived the  benefit  thereof.  If  the  agent  carried  the  account  with 
the  bank  for  a  suffcient  length  of  time,  and  under  such  circum- 
stances that  his  superior  officers  knew  or  ought  to  have  known 
that  the  account  was  being  carried,  this,  of  course,  would  tend 
to  support  the  contention  that  the  company  had  ratified  his  act 
in  opening  the  account.  If  it  can  be  shown  that  the  money  was 
used  for  the  benefit  of  the  corporation,  and  with  its  knowledge, 
the  corporation  would  be  liable  regardless  of  any  private  instruc- 
tions or  understanding  which  it  had  with  its  agent. 


226  PARK'S  BANKING  LAW  otf  GEORGIA. 

Bank  Paying  to  Supposed  Agent  of  Payee  Does  so  at  its  Peril. 

A  check  is  drawn  in  favor  of  three  payees  and  is  sent  to  their  attorney. 
Before  its  receipt  one  of  the  payees  dies.  The  attorney,  however,  indorses 
the  check  in  the  name  of  the  three,  and  deposits  it  with  a  bank  to  his  own 
account.  The  bank  forwards  the  check  for  collection,  guaranteeing  in- 
dorsements. It  is  advised  by  its  correspondent  that  the  check  is  paid,  but 
some  thirty  days  afterwards  the  bank  on  which  the  check  is  drawn  ad- 
vises that  -the  drawer  of  the  check  refuses  to  recognize  the  indorsement 
of  the  attorney,  and  the  check  is,  therefore,  charged  to  the  account  of  the 
forwarding  bank  by  its  correspondent.  Is  this  bank  authorized  to  charge 
the  check  to  the  attorney?  Whose  is  the  loss  in  the  event  proper  indorse- 
ment of  the  check  can  not  be  had? 

A  check  is  an  order  by  the  drawer  on  the  bank  to  pay  out  of 
the  funds  to  his  credit  a  given  amount  to  a  named  person.  The 
bank  must  pay  to  this  person  or  to  his  order.  It  is  not  authorized 
to  pay  to  any  one  else.  When,  therefore,  a  bank  undertakes  to 
pay  to  a  person  who  assumes  to  be  the  agent  of  the  payee,  it  does 
so  at  its  peril,  the  burden  being  upon  the  bank  to  show  that  this 
agent  is  duly  authorized  by  the  payee  to  indorse  the  check  in  the 
payee's  name  and  collect  the  amount  thereof.  Quoting  from 
Michie  on  Banks  and  Banking: 

"A  bank  at  its  peril  pays  checks  drawn  upon  it  to  any  other 
than  the  person  to  whose  order  they  are  made  payable.  A  bank, 
paying  a  check  upon  the  unauthorized  indorsement  of  the  payee 
and  charging  the  amount  thereof  to  the  drawer's  account,  is  liable 
to  the  payee  for  the  amount  of  the  check,  unless  the  payee's  con- 
duct excuses  sucji  payment  or  prevents  him  from  asserting  such 
liability."  Michie  on  Banks  and  Banking,  p.  1124. 

The  Supreme  Court  of  Georgia,  in  the  case  of  Atlanta  Na- 
tional Bank  v.  Burke,  81  Ga.  589,  says : 

"Where  one  deposits  money  in  a  bank  on  general  deposit,  the 
bank  immediately  becomes  the  debtor  of  the  depositor  for  the 
money  deposited  and  undertakes  impliedly  to  pay  that  money 
either  to  the  depositor  or  to  some  person  to  whom  he  directs  it 
paid,  and  in  order  to  discharge  itself  from  this  liability  to  the 
depositor  the  bank  must  pay  the  money  to  the  depositor  or  as  di- 
rected by  him.  The  liability  can  not  be  discharged  in  any  other 
way." 

Applying  this  principle  to  the  facts  as  stated :  The  drawer  of 
the  check  directed  payment  to  the  three  named  payees.  The  bank 
had  no  right,  therefore,  to  pay  the  check  to  any  one  else,  although 
the  person  presenting  it  was  the  attorney-at-law  of  the  payees 
and  may  have  had  an  interest  in  the  check  on  account  of  his  fee. 
In  this  instance  the  attorney  could  not  have  been  authorized  to 
sign  the  names  of  the  payees  as  one  of  them  was  dead.  The 
bank  having  cashed  the  check  without  authority  did  so  at  its 
peril,  and  the  correspondent  to  whom  it  had  guaranteed  the  in- 


OPINIONS  of  THE  GENERAL  COUNSEL.  227 

dorsement  had  the  right  to  charge  the  check  to  its  account,  and  if 
the  check  went  through  several  banks  before  reaching  the  bank 
upon  which  it  was  drawn,  each  one  of  these  in  turn  would  have 
had  the  right  to  charge  the  check  to  the  account  of  the  bank  from 
which  it  received  it.  As  between  the  bank  and  the  attorney,  the 
loss  should,  of  course,  fall  on  the  attorney,  as  he  undertook  with- 
out authority  to  indorse  and  collect  the  check. 

I  do  not  think  the  question  of  delay  in  reporting  on  the  check 
or  in  objecting  to  the  unauthorized  indorsement  can,  under  the 
facts  as  stated,  make  any  difference.  As  I  understand  it,  the 
drawer  of  the  check  refused  to  recognize  the  indorsement  as  soon 
as  the  matter  was  brought  to  his  attention.  He  did  nothing  to 
mislead  or  to  cause  the  bank  or  any  of  its  correspondents  to 
change  their  position.  The  drawer,  therefore,  was  clearly  within 
his  rights  when  he  declined  to  recognize  the  indorsement  and  in- 
sisted on  the  signature  of  the  drawees  themselves.  The  fact 
that  the  bank's  correspondents  accepted  the  check  as  cash  and 
advised  that  it  had  been  paid,  I  think,  makes  no  difference,  as  they 
acted  on  the  guarantee  of  the  forwarding  bank  that  the  indorse- 
ment was  authorized. 


Payment  of  Draft  to  Messenger  of  Bank,  Who  Does  Not 
Produce  It,  Is  at  Risk  of  Payor. 

A  draft  is  sent  to  a  bank  for  collection.  It  is  presented  to  the  drawee 
by  the  bank's  messenger.  The  drawee  states  that  he  can  not  pay  the 
draft  then,  but  will  do  so  in  a  few  days.  The  draft  is  returned  by  the 
bank  with  the  usual  notation.  A  few  days  thereafter,  according  to  the 
drawee,  he  pays  the  draft  to  the  messenger,  who  promises  to  mail  him 
the  draft.  The  messenger  denies  this,  and  the  bank  does  not  receive  the 
money,  and  it  is  not  advised  of  the  claim  of  the  drawee  that  he  paid  the 
draft  for  several  months.  Is  the  bank  liable  to  the  drawee  for  the  amount 
which  he  claims  to  have  paid  the  messenger? 

Section  3578  of  Park's  Ann.  Code  provides: 

"Where  money  is  due  on  a  written  evidence  of  debt,  payment 
to  an  agent  of  the  creditor  who  fails  to  produce  the  obligation 
is  at  the  risk  of  the  debtor.  Nonproduction  of  the  security  rebuts 
the  implication  of  authority  arising  from  the  agent's  employment, 
and  it  must  be  otherwise  established." 

And  the  Supreme  Court  has  held : 

"If  the  debtor  by  promissory  note  makes  a  payment  thereon  to 
one  claiming  to  be  an  agent  for  collection,  it  is  incumbent  on  the 
former  to  see  that  the  latter  is  in  possession  of  the  security ;  for, 
if  he  is  not,  the  debtor  will  be  liable  to  pay  again,  unless  the  person 


228  PARK'S  BANKING  LAW  OF  GEORGIA. 

making  the  collection  had  authority  to  collect  the  sums  due  his 
principal,  or  the  money  actually  reached  the  owner."  Walton 
Guano  Co.  v.  McCall,  111  Ga.  114. 

The  Court  also  held : 

"The  inference  that  an  agent  is  authorized  to  collect  a  written 
security  for  a  debt  because  it  is  in  his  custody,  ceases  when  the 
security  is  withdrawn  by  the  creditor ;  and  this,  even  though  the 
debt  may  have  been  contracted  through  the  agent. 

"If  the  debtor  pay  such  a  claim  to  one  who  is  not  in  possession 
of  the  security,  it  is  incumbent  on  him  to  show  that  the  person 
receiving  payment  had  authority  to  collect  the  debt."  Guilford 
v.  Stacer,  53  Ga.  618. 

From  these  authorities  it  seems  clear  that  the  bank  is  not  liable, 
even  though  the  money  was  actually  paid  to  the  messenger,  unless 
the  money  was  turned  over  by  the  messenger  to  the  bank.  The 
bank  is  not  liable  for  the  unauthorized  act  of  an  agent  or  em- 
ployee, unless  from  a  course  of  dealing  or  otherwise  it  has  led 
the  party  dealing  with  the  agent  to  believe  that  the  act  in  ques- 
tion is  within  the  scope  of  the  agent's  authority.  While  a  mes- 
senger is  authorized  to  collect  papers  in  his  hands,  and  a  person 
paying  to  such  messenger  a  paper  presented  to  him  would  be 
protected  in  so  doing,  the  failure  of  the  messenger  to  produce  the 
draft  in  the  case  under  consideration  rebutted  any  presumption 
which  might  otherwise  exist  that  he  had  authority  to  collect.  It 
was  incumbent  upon  the  drawee  of  the  draft  to  ascertain  the  au- 
thority of  the  messenger  when  the  messenger  failed  to  produce 
the  draft.  If  he  had  inquired  he  would  have  ascertained  that  the 
agent  did  hot  have  authority  as  a  matter  of  fact,  because  the 
draft  in  question  had  been  returned  to  the  drawer.  The  agent 
having  no  authority  to  collect  and  any  presumption  of  authority 
being  rebutted  by  his  failure  to  produce  the  draft,  the  drawee 
took  all  the  risk  of  paying,  and,  therefore,  as  between  him  and 
the  bank  he  will  have  to  lose  the  amount  paid. 


Note  Signed  by  Named  Party  as  Agent   Is  the   Individual 
Undertaking  of  the  Maker. 

Can  suit  be  entered  against  the  undisclosed  principal  and  the  indorser 
a  "pte  under  seal,  the  note  being  payable  to  a  named  party  with  the 
word    Agent    added  and  indorsed  in  the  same  way? 

"An  instrument,  signed  by  one  as  agent,  trustee,  guardian,  ad- 
ministrator, executor,  or  the  like,  without  more,  is  the  individual 


OPINIONS  OF  THS  GENERAL  COUNSEL.  229 

undertaking  of  the  maker,  such  words  being  generally  words  of 
description."    Park's  Ann.  Code,  §  3570. 

"It  is  generally  true  at  common  law  that  a  suit  could  be  main- 
tained against  an  undisclosed  principal  on  a  written  contract,  but 
there  were  exceptions  to  this  rule,  among  which  were  that  undis- 
closed principals  could  not  be  held  liable  upon  a  suit  upon  nego- 
tiable instruments,  nor  upon  instruments  .under  seal,  and  this  is 
now  the  law  as  ruled  by  this  and  other  courts,  and  announced  by 
many  text  writers.  This  is  true  where  the  words  'as  agent'  or 
'as  trustee'  occur  after  the  signature  of  the  maker  of  a  negotiable 
instrument  without  disclosing  the  name  of  the  principal  or  with- 
out sufficiently  indicating  on  the  face  of  the  instrument  who  the- 
principal  is."  '  Coaling  Coal  Co.  v.  Howard,  130  Ga.  807,  811. 

This  decision  of  our  Supreme  Court  is  abundantly  supported  by 
a  number  of  cases  cited  in  the  opinion,  and  seems  to  be  conclusive 
of  the  question. 

It  has  been  held  where  credit  has  Seen  extended  to  the  principal 
and  a  note  is  given  signed  by  the  principal's  agent  that  as  between 
the  orignial  parties  the  facts  might  be  shown  and  the  principal 
held  on  the  contract.  Burhalter  v.  Perry,  127  Ga.  438.  But  this 
seems  not  to  apply  to  instruments  under  seal.  Van  Dyke  v. 
Van  Dyke,  123  Ga.  686. 


Notes  Signed  by  Administrator  Bind  Maker  Personally,  but 
Do  Not  Bind  the  Estate. 

Can  a  note  signed  by,  or  an  overdraft  in  the  name  of  an  administrator 
be  enforced  against  the  estate  for  which  he  is  acting?  If  not,  may  it  be 
enforced  against  him  personally? 

From  Section  3570  of  Park's  Ann.  Code,  it  will  be  seen  that 
a  paper  signed  by  an  administrator  is  generally  taken  to  be  the  in- 
dividual undertaking  of  the  administrator  on  which  he  would  be 
personally  liable,  but  for  which  the  estate  could  not  generally  be 
held.  As  a  general  proposition,  an  administrator  has  no  authority 
to  borrow  money  for  an  estate,  and  a  note  signed  by  him  is  re- 
garded as  his  individual  undertaking.  As  an  administrator 
usually  has  no  authority  to  borrow  money  for  the  estate,  he  could 
not  bind  the  estate  by  an  overdraft.  There  may  be  some  circum- 
stances, as  for  instance,  where  an  administrator  is  temporarily 
carrying  on  the  business  of  the  estate  under  the  orders  of  the 
court,  in  which  he  might  have  authority  to  borrow  money  and 
bind  the  estate  by  a  note.  In  taking  such  a  note  it  should  always 
be  clearly  shown  that  it  is  an  obligation  of  the  estate  and  not  of 
the  administrator. 


230  PARK'S  BANKING  LAW  OF  GEORGIA. 

ATTACHMENT. 


Foreign  Creditor  of  Georgia  Bank  Can  Subject  Its  Account 
with  a  Bank  in  Another  State  by. 

Can  a  creditor  in  New  York  of  a  bank  in  Georgia,  in  order  to  enforce 
payment  of  his  debt,  attach  the  Georgia  bank's  account  with  a  New  York 
bank? 

Under  the  law  of  Georgia,  an  attachment  may  issue  against  a 
nonresident  and  may  be  served  by  process  of  garnishment  issued 
to  any  one  who  may  be  indebted  to  the  nonresident  or  may  have 
in  his  possession  or  control  any  property,  money,  or  effects  of 
such  nonresident.  While  the  process  differs  somewhat  in  the 
different  states,  in  all  of  them,  so  far  as  I  am  aware,  some  such 
means  is  provided  for  reaching  property  of  a  nonresident,  ~or 
money  due  to  him,  at  the  instance  of  a  local  creditor,  and  it  is 
not  usually  necessary  to  obtain  a  judgment  before  beginning  such 
proceedings.  Of  course,  it  would  not  be  possible  to  secure  a 
personal  judgment  against  a  nonresident,  but  any  property  of 
such  nonresident  can  be  subjected  to  his  indebtedness  under  the 
process  of  attachment  and  garnishment  as  above  indicated. 

Without  undertaking  to  state  precisely  the  procedure  in  New 
York,  there  is  no  doubt  that  an  attachment  could  be  issued  against 
the  Georgia  bank  and  any  money  due  to  it  by  its  New  York  cor- 
respondent or  any  deposit  with  such  correspondent  could  be  seized 
by  garnishment  or  some  similar  process. 


Amount  Paid  on  Draft,  with  Order  Notify  Bill  of  Lading  At- 
tached, Not  Subject  to  Attachment  When  Discounted  by 
Drawer. 

A  car  of  corn  was  shipped  by  a  dealer  in  another  state  on  order  notify 
bill  of  lading  to  a  merchant  in  Georgia.  The  bill  of  lading  was  attached 
to  a  draft  which  was  deposited  by  the  shipper  with  a  bank  in  that  state 
to  his  general  account  subject  to  check.  On  arrival  the  corn  was  found 
to  be  short  weight,  and  the  merchant  who  received  it  having  paid  the  draft, 
sued  out  an  attachment  against  the  shipper  and  served  the  local  bank 
with  summons  of  garnishment  for  the  purpose  of  subjecting  the  fund  paid 
on  the  draft.  The  fund  is  claimed  by  the  bank  which  discounted  the 
draft,  that  bank  claiming  to  be  the  owner.  Is  the  fund  subject  to  the 
attachment  ? 

The  Supreme  Court  has  passed  on  the  question  several  times. 
Possibly  the  best  statement  is  in  the  case  of  National  Bank  v. 
Everett,  136  Ga.  372,  from  which  I  quote: 


OPINIONS  OF  THE  GENERAL  COUNSEL.  231 

"Where  a  customer  of  a  milling  company  orders  flour,  which 
is  consigned  by  the  milling  company  to  itself  with  a  memorandum 
on  the  bill  of  lading  to  notify  the  customer,  and  contemporane- 
ously the  milling  company  draws  a  draft  for  the  price  of  the 
flour  on  the  customer,  payable  to  a  bank,  to  which  is  attached  the 
bill  of  lading  endorsed  in  blank,  and  deposits  with  the  bank  the 
draft  with  bill  of  lading  attached,  and  the  amount  of  the  deposit  is 
credited  to  the  depositor's  general  account  and  drawn  against  by 
him,  the  bank  becomes  the  purchaser  and  owner  of  the  draft  and 
bill  of  lading ;  and  the  title  of  the  bank  to  the  flour  is  superior  to 
a  subsequent  lien  against  the  milling  company." 

Under  a  similar  state  of  facts,  the  Supreme  Court  in  the  case 
of  Merchants  National  Bank  v.  Parker,  142  Ga.  265,  said  that 
"the  proceeds  of  the  draft  belonged  to  the  bank  (which  had  dis- 
counted it)  and  were  not  subject  to  an  attachment  taken  out  by  the 
drawee  of  the  draft  against  the  shipper." 

Under  the  facts  as  stated  and  under  these  decisions  of  the 
Supreme  Court,  the  fund  is  not  subject  to  the  attachment  against 
the  shipper,  but  belongs  to  the  bank  which  discounted  the  draft. 
I  do  not  think,  however,  that  the  local  bank  would  be  safe  in  pay- 
ing over  the  fund  to  the  other  bank  without  some  understanding 
from  it  as  to  its  protection  in  so  doing.  The  nonresident  bank 
should  file  a  claim  to  the  fund  and  dissolve  the  garnishment  by. 
giving  bond.  The  local  bank  should  not  be  put  to  the  burden  of 
proving  that  the  fund  belongs  to  the  other  bank.  Possibly  if  the 
latter  will  agree  to  be  responsible  to  the  former  in  the  event  the 
fund  should  be  held  to  belong  to  the  shipper,  it  might  be  safe 
for  this  bank  to  pay  over  the  fund  and  answer  not  indebted  on  the 
garnishment.  The  answer  would  probably  be  traversed,  and  on 
this  traverse  the  court  would  have  to  decide  whether  the  fund  be- 
longed to  the  shipper  or  to  the  nonresident  bank,  and  of  course  the 
burden  would  be  on  the  merchant  who  purchased  the  corn  to 
establish  his  contention  that  the  fund  belongs  to  the  shipper. 

But,  as  above  stated,  I  think  by  far  the  best  way  to  handle  the 
matter  is  to  insist  on  the  nonresident  bank's  claiming  the  fund 
and  dissolving  the  garnishment,  taking  on  itself  the  burden  of 
establishing  its  ownership. 


232  PARK'S  BANKING  LAW  OF  GEORGIA. 

ATTESTATION  OF  INSTRUMENTS. 


Employees  of  bank  are  not  disqualified  to  attest  papers  in 
bank's  favor  unless  pecuniarily  interested  as  stockholders 
or  otherwise. 

Can  a  notary  public  who  is  an  officer  of  a  bank  attest  papers  in  its 
favor?  Can  he  protest  papers  handled  by  the  bank? 

"A  notary  public  is  disqualified  from  attesting  a  deed  or  bill 
of  sale,  so  as  to  entitle  it  to  record,  if  he  is  pecuniarily  or  bene- 
ficially interested  in  the  transaction. 

"A  stockholder  of  a  corporation  bears  such  financial  relation 
to  it  that  he  is  disqualified,  on  account  of  interest,  from  attesting 
as  a  notary  a  deed  or  bill  of  sale  to  which  the  corporation  is  a 
party."  Sou.  Iron  &  Equip.  Co.  v.  Voyles,  138  Ga/258. 

But  an  agent  or  employee  of  a  bank  who  is  not  a  stockholder  is 
competent  as  an  attesting  witness  if  he  has  no  personal  financial 
interest  in  the  transaction.  I  quote  from  a  decision  by  the  Court 
of  Appeals  in  the  case  of  Stimpson  Computing  Scale  Company  v. 
Holmes-Hartsfield  Company,  6  Ga.  App.  569: 

"An  agent  of  a  corporation  is  competent  as  an  attesting  wit- 
ness upon  a  mortgage  or  other  similar  instrument  executed  in 
favor  of  the  corporation,  if  he  has  no  personal  financial  interest 
in  the  transaction." 

The  court  in  the  earlier  case  of  Betts-Evans  Company  v.  Bass, 
2  Ga.  App.  718,  says : 

"We  do  not  see  that  a  clerk  who  has  no  interest  conditional 
upon  the  profits  might  not  as  notary  public  attest  deeds,  mort- 
gages, or  conditional  bills  of  sale  in  behalf  of  his  employer,  or  that 
a  cashier  or  other  officer  of  a  bank  who  owns  no  stock  therein 
might  not  do  the  same  thing,  though  this  would  be  of  doubtful 
propriety." 

But  in  the  case  of  Barrow  v.  E.  Tris  Napier  Co.,  16  Ga.  App. 
309,  it  was  held  that : 

"A  mortgage  attested  by  a  notary  public,  who  is  secretary  and 
treasurer  of  the  corporation  to  which  it  is  given,  is  not  properly 
executed,  and  therefore  not  admissible  for  record." 

The  court  cites  in  support  of  its  decision  the  Bass  case,  supra, 
in  which  case,  it  will  be  seen,  the  court  had  taken  just  the  opposite 
view. 

The  Barrow  case  is  a  headnote  or  memorandum  decision,  the 
court  not  attempting  to  discuss  the  question  at  all.  The  decision 
seems  to  be  out  of  line  with  other  cases  decided  both  by  the 
Supreme  Court  and  the  Court  of  Appeals. 


OPINIONS  OP  THE  GENERAL  COUNSEL.  233 

The  Supreme  Court  has  decided  that  a  stockholder  is  not  in- 
competent to  act  as  a  nonofficial  witness  to  the  signature  of  the 
corporation  to  mortgages  or  deeds.  Peagler  v.  Davis,  143  Ga. 
11  (3).  And  in  a  recent  decision  following  the  Peagler  case  it 
was  said : 

"A  stockholder  or  officer,  though  incompetent  to  take  an  ac- 
knowledgment of  a  mortgage  on  realty  as  a  notary,  because  he  is 
a  stockholder  or  officer  of  the  mortgagee  corporation,  is  not  in- 
competent as  a  nonofficial  witness  to  the  signature  of  the  mort- 
gagee. Peagler  v.  Davis,  143  Ga.  11,  84  S.  E.  59,  Ann.  Cas. 
1917A,  232."  Hastey  v.  Roberts,  —  Ga.  — ,  100  S.  E.  569. 

This  is  a  mere  obiter  statement.  The  question  is  still  open  so 
far  as  the  Supreme  Court  is  concerned.  But  in  view  of  the  de- 
cision of  the  Court  of  Appeals  in  the  Barrow  case  it  is  certainly 
not  safe  for  an  officer,  although  not  a  stockholder,  to  attest  mort- 
gages or  other  similar  papers  in  favor  of  his  corporation. 


Notary  Public  in  Georgia  Not  Required  to  State  When  Com- 
mission Expires. 

Must  a  notary  in  Georgia,  when  he  attests  a  paper,  state  when  his  com- 
mission expires? 

There  are  statutes  in  many  of  the  States  which  require  such  a 
statement,  but  there  is  no  such  statute  in  Georgia. 


BANKRUPTCY. 


Proof  of  Joint  Note  Not  Necessary  to  Hold  Co-debtor. 

Would  a  bank  be  safe  in  not  proving  in  bankruptcy  a  joint  note,  where 
one  of  the  makers  is  in  bankruptcy,  the  other  being  solvent  and  fully  able 
to  pay  the  note? 

Section  16  of  the  Act  of  Congress  establishing  a  uniform 
system  of  bankruptcy  is  as  follows : 

"The  liability  of  a  person  who  is  a  co-debtor  with  or  guarantor 
or  in  any  manner  a  surety  for  a  bankrupt  shall  not  be  altered  by 
the  discharge  of  such  bankrupt." 

Mr.  Collier,  one  of  the  leading  writers  on  bankruptcy,  in  dis- 
cussing this  section,  says : 

"It  makes  no  difference  under  this  section  whether  the  creditor 
proves  his  claim  and  gets  his  dividend.  The  co-debtor  or  surety 


234  PARK'S  BANKING  LAW  otf  GEORGIA. 

may  protect  himself  by  proving  the  claim,  and  can  not  complain 
if  the  debtor  [creditor?]  does  not."  Collier  on  Bankruptcy,  10th 
Edition,  p.  375. 

It  seems  under  this  authority  optional  with  the  creditor  whether 
he  proves  his  claim  or  not.  The  joint  debtor  is  not  released  by  the 
bankruptcy  of  his  co-debtor.  While  this  is  true,  it  would  gener- 
ally seem  to  be  best  for  a  bank  to  consult  the  wishes  of  the  solvent 
debtor.  If  he  desires  the  claim  proved,  the  bank  ordinarily  should 
make  the  proof  and  collect  the  dividend.  While  it  is  not  bound 
to  do  so,  proper  regard  for  its  customers  would  seem  to  suggest 
that  the  bank  protect  them  as  far  as  it  can  by  collecting  from  the 
bankrupt's  estate  and  thus  relieve  the  co-debtor,  at  least  in  part. 


Waiver  of  Right  to  Go  into  Bankruptcy  in  Face  of  Note  Is 

Not  Valid. 

Can  the  right  to  go  into  bankruptcy  be  waived  by  a  provision  embodied 
in  the  face  of  a  note? 

One  can  not  waive  his  right  to  go  into  bankruptcy  voluntarily, 
and  certainly  he  can  not  make  such  a  waiver  as  will  preclude  his 
creditors  from  forcing  him  into  bankruptcy  if  he  becomes  insol- 
vent ;  nor  can  the  maker  of  a  note  waive  as  to  that  particular  note 
the  effect  of  his  subsequent  bankruptcy.  That  is  to  say,  a  pro- 
vision in  a  note  to  the  effect  that  the  note  should  not  be  affected 
by  the  maker's  subsequent  bankruptcy,  would  be  invalid.  The 
purpose  of  the  Bankruptcy  Act  is  to  protect  creditors  as  well 
as  the  debtor.  Such  a  provision  in  a  note  if  allowed  to  be 
effective,  would  injuriously  affect  the  rights  of  other  creditors 
than  the  one  holding  the  note. 

Of  course,  a  waiver  of  homestead  in  a  note  is  valid,  and  if  the 
maker  of  such  a  note  afterwards  goes  into  bankruptcy,  he  can  not 
then  take  a  homestead  as  against  the  holder  of  the  note. 


Securities  for  Advances  Made  in  Good  Faith  Are  Not  Pref- 
erences, Although  Given  Within  Four  Months  of  Bank- 
ruptcy. 

A  bank  advances  funds  to  a  customer  to  pay  for  cotton  to  be  purchased 
by  him  and  the  customer  turns  over  to  the  bank  from  time  to  time  ware- 
house receipts  and  insurance  policies  covering  the  cotton  so  purchased.  In 
the  event  this  customer  should  be  adjudged  a  bankrupt,  could  the  bank 


OPINIONS  OF  THE  GENERAI,  COUNSEL.  235 

hold  the  receipts?  If  the  bankruptcy  occurred  within  four  months,  could 
the  trustee  recover  the  receipts  and  reduce  the  status  of  the  bank  to  that 
of  an  unsecured  creditor? 

Preference  implies  taking  security  for  a  debt  already  ex- 
isting. A  bona  fide  transaction  where  security  is  taken  for 
advances  made  at  the  time,  does  not  constitute  a  preference. 
The  Bankruptcy  Act  was  not  intended  to  prevent  the  giving  of 
security  for  money  borrowed  or  advances  made,  but  was  only 
intended  to  prevent  an  insolvent  from  preferring  one  creditor 
over  another.  Where  warehouse  receipts  are  turned  over  to  a 
bank  at  the  time  the  advances  are  made,  it  could  hold  such  re- 
ceipts, no  matter  how  shortly  thereafter  the  bankruptcy  of  the 
customer  occurred.  Even  if  it  knew  that  the  customer  was  in  bad 
financial  condition,  it  would  be  entitled  to  security  for  advances 
actually  made,  and  such  transactions  where  in  good  faith  are  not 
inimical  to  the  Bankruptcy  Act  and  do  not  constitute  preferences 
within  the  meaning  of  that  act.  Bailey  v.  Baker  Ice  Machine 
Co.,  239  U.  S.  268,  60  L.  Ed.  275. 


Note  Waiving  Homestead  Is  a  Debt  Dischageable  in 
Bankruptcy. 

Will  bankruptcy  discharge  an  indebtedness  evidenced  by  a  note  waiving 
homestead  and  exemption  under  the  Constitution  and  laws  of  Georgia  or 
of  the  United  States? 

Bankruptcy  completely  discharges  all  provable  debts.  A  debt 
evidenced  by  a  note  is  a  provable  debt  in  bankruptcy.  Where  the 
bankrupt  enters  the  name  of  the  creditor  on  his  schedule  the 
debt  would  be  discharged  by  the  bankruptcy,  and  if  a  suit  was 
entered  on  the  note  afterwards  the  discharge  granted  by  the 
Bankruptcy  Court  would  be  a  complete  bar  to  the  action. 

The  waiver  of  homestead  contained  in  the  note  would  be  good, 
and  if  the  bankrupt  claimed  a  homestead  the  holder  by  bringing 
suit  in  the  State  Court  could  have  a  receiver  appointed,  who 
would  take  charge  of  and  administer  the  homestead  set  apart  by 
the  Bankruptcy  Court  for  the  benefit  of  the  creditors  holding 
notes  waiving  homestead;  but  so  far  as  the  debt  itself  is  con- 
cerned, bankruptcy  would  be  a  complete  discharge. 


236  PARK'S  BANKING  LAW  OF  GEORGIA. 

Mortgaged  Property  Can  be  Sold  by  Trustee  in  Bankruptcy 
Freed  of  Lien  and  Mortgagee  Be  Paid  Out  of  Proceeds. 

Where  a  bank  holds  a  mortgage  on  property  of  a  bankrupt,  can  the 
property  be  sold  freed  of  the  lien  of  the  mortgage  and  the  bank  get  its 
money  out  of  the  proceeds? 

It  is  customary  after  a  trustee  in  bankruptcy  has  been  elected 
for  the  trustee  to  apply  to  the  referee  for  leave  to  sell  the  property 
of  the  bankrupt.  Where  property  is  covered  by  a  mortgage  or 
other  lien,  the  usual  practice  is  for  the  trustee  to  apply  for  leave 
to  sell  the  property  freed  of  liens,  the  liens  to  attach  to  the  pro- 
ceeds of  sale.  I  quote  from  Remington  on  Bankruptcy,  p.  1223 : 
"The  property  may  be  sold  free  from  liens  and  incumbrances, 
and  the  liens  be  transferred  to  the  proceeds."  Where  this  is 
done,  the  mortgage  creditor  can  intervene  in  the  bankruptcy  cause 
and  have  the  mortgage  satisfied  out  of  the  proceeds  of  the  sale. 

Under  the  Bankruptcy  Act  the  trustee  can  offer  the  property 
for  sale  subject  to  the  lien,  but  as  it  is  usually  best  for  all  parties 
that  the  unincumbered  title  to  the  property  should  be  sold  rather 
than  the  equity  after  the  payment  of  the  mortgage,  the  other 
practice  is  generally  resorted  to.  Where  this  is  done,  unless  it 
is  upon  the  application  of  the  mortgage  creditor  or  at  his  in- 
stance, he  is  entitled  to  receive  the  full  amount  of  his  mortgage 
debt  without  the  payment  of  costs,  unless  the  property  brings  less 
than  the  mortgage  debt,  in  which  event  it  is  usually  taxed  with 
the  expenses  of  the  sale. 


A  Bank  Has  the  Right  to  Set  Off  an  Indebtedness  Due  it 
Against  Deposit  of  a  Bankrupt. 

Has  a  bank  the  right,  under  the  Bankruptcy  Act,  to  set  off  amounts 
collected  on  notes  deposited  with  it  for  collection  as  against  notes  of  the 
depositor  held  by  the  bank? 

The  Bankruptcy  Act  expressly  authorizes  the  set-off  of  mutual 
accounts.  This  has  been  repeatedly  held  to  include  deposits  in 
bank  as  against  notes  of  the  depositor.  There  are  numerous  de- 
cisions to  this  effect.  I  do  not  recall  a  case  in  which  has  been 
decided  the  precise  question  as  to  the  right  of  a  bank  receiving 
notes  for  collection  to  set-off  the  proceeds  of  the  collections  as 
against  the  notes  of  the  depositor,  but  in  the  case  of  Continental 
&  Commercial  Trust  &  Savings  Bank  v.  Chicago  Title  &  Trust 
Company,  229  U.  S.  435,  57  L.  Ed.  1268,  the  United  States 


OPINIONS  OF  THE  GENERAL  COUNSEL.  237 

Supreme  Court  practically  decided  the  question.    I  quote  the  third 
head-note : 

"A  balance  left  in  a  deposit  subject  to  check  for  specific 
purposes  may  be  applied  by  the  bank  to  the  payment  of  the  de- 
positor's indebtedness  to  it  without  violating  the  prohibitions  of 
the  Bankruptcy  Act  of  July  1,  1898,  section  60  a  and  b,  against 
preferential  transfers,  although  the  transaction  was  within  four 
months  of  the  bankruptcy  proceedings  against  the  depositor,  and 
the  bank  at  the  time  had  reasonable  cause  to  believe  him  insolv- 
ent." 


BILL  OF  LADING. 


Railroad  delivering  goods  shipped  on  order  notify  bill  of 
lading  without  requiring  surrender  thereof  is  liable  to 
the  transferee. 

A  dealer  ships  a  car  of  corn  on  order  notify  bill  of  lading  and  draws 
draft  on  his  customer,  attaching  bill  of  lading  to  the  draft.  This  draft  is 
discounted  by  a  bank.  The  railroad  by  mistake  bills  the  car  open,  and  it 
is  delivered  to  the  customer  without  the  surrender  of  the  bill  of  lading.  Is 
the  railroad  liable  for  such  delivery? 

"For  the  purpose  of  obtaining  payment  for  the  goods  before 
delivery  to  the  person  for  whom  they  are  intended,  it  is  frequently 
the  custom  for  the  shipper,  on  delivering  his  goods  to  the  carrier, 
to  take  a  bill  of  lading  calling  for  a  delivery  to  his  own  order  and, 
after  attaching  a  draft  drawn  upon  the  person  for  whom  the 
goods  are  intended,  to  forward  the  same  to  a  bank  at  the  point  of 
delivery  where  the  drawee,  on  payment  of  the  draft,  may  secure 
the  bill  of  lading.  When  such  a  course  is  taken  the  carrier  will 
be  liable  to  the  consignor  if  loss  ensue  through  a  delivery  of  the 
goods  to  the  drawee  before  he  has  paid  the  draft  and  obtained 
possession  of  the  bill  of  lading  from  the  bank."  Hutchinson  on 
Carriers,  §  183. 

"The  practice  is  also  common  in  commercial  circles  for  the 
shipper  of  goods  to  take  from  the  carrier  a  bill  of  lading  provid- 
ing for  a  delivery  to  his  own  order,  and  pledge  it  as  collateral 
security  for  money  advanced  upon  the  faith  of  its  representing 
the  goods.  The  usual  custom  in  such  a  case  is  for  the  shipper  to 
draw  a  draft  upon  the  person  for  whom  the  goods  are  intended, 
attach  it  to  the  bill  of  lading,  and  secure  a  discount  of  the  draft 
by  indorsing  the  bill  of  lading  to  a  bank.  The  bank  thus  becomes 
the  lawful  holder  of  the  bill  of  lading  as  pledgee  and  may  retain 
the  same  in  its  possession  until  payment  of  the  draft  is  made ; 
and  if  the  carrier  makes  delivery  of  the  goods  to  the  drawee  of 
the  draft  before  he  has  obtained  possession  of  the  bill  of  lading 
from  the  bank,  such  delivery  will  be  wrongful  and  the  carrier 
will  be  liable  to  the  bank  as  for  a  conversion."  Ibid.,  §  184. 


238  PARK'S  BANKING  LAW  OF  GEORGIA. 

These  two  quotations  from  a  recognized  authority  on  the  sub- 
ject correctly  state  the  law  as  I  understand  it.  On  the  facts 
stated  the  railroad,  having  delivered  the  corn  without  requiring 
the  surrender  of  the  bill  of  lading  and  the  payment  of  the  draft, 
would  be  liable  to  the  bank  for  having  converted  the  corn,  title 
to  which  by  the  transfer  of  the  bill  of  lading  passed  from  the 
shipper  to  the  bank. 


BOND  FOR  TITLE. 


Rights  of  Vendor  Upon  Default. 

Can  the  vendor  of  land,  having  given  a  bond  for  title,  sell  the  land  to 
another  purchaser  notwithstanding  the  fact  that  the  bond  for  title  is  still 
outstanding,  the  vendee  of  the  land  having  defaulted  in  his  payments? 

A  very  good  general  statement  of  the  rights  of  a  vendee  of 
land  holding  a  bond  for  title,  is  the  following,  from  Powell's 
Actions  for  Land,  p.  502 : 

"The  vendee  under  bond  for  title,  *  *  *  *  acquires  an 
equitable  title  to  the  land,  charged  with  the  payment  of  the  pur- 
chase money.  In  substance  and  apart  from  the  merely  formal 
and  strictly  legal  phase  of  the  matter,  he  is  the  owner  of  the  land. 
The  vendor  has  elected  to  exchange  his  land  for  the  promised 
money  represented  by  the  notes  given  by  the  vendee.  If  the 
property  goes  down  in  value,  the  loss  is  the  vendee's,  for  he  is, 
nevertheless,  bound  to  pay  the  notes  in  full ;  if  it  goes  up  in  value 
the  profit  should  be  his.  The  vendee,  therefore,  acquires  rights 
which  are  presumptively  valuable  and  which  the  law  will  not 
lightly  forfeit." 

Upon  the  failure  of  the  purchaser  holding  a  bond  for  title 
to  pay  his  installments  as  they  mature,  it  is  the  right  of  the  vendor 
to  reduce  the  purchase  money  notes  to  judgment,  file  a  deed,  and 
sell  the  land,  or  he  can  bring  ejectment  against  the  vendee  to  re- 
cover the  land.  If  the  land  is  vacant  the  vendor  can  reenter  and 
take  possession  of  it.  But  if  the  vendor  reenters  and  takes  pos- 
session of  the  land,  he  thereby  elects  to  rescind  the  trade,  and 
there  is  then  an  implied  obligation  on  his  part  to  restore  to  the 
purchaser  the  amount  of  the  purchase  money  which  he  has  paid, 
less  such  an  amount  as  would  prevent  actual  loss  to  the  vendor  by 
reason  of  the  vendee's  nonperformance  of  the  contract,  and  if  the 
vendor  does  not  return  the  purchase  money  already  paid  the 
vendee  can  recover  it  from  him  by  suit.  McDaniel  v.  Gray  69 
Ga.  434. 


OPINIONS  of  THE;  GENERAL  COUNSEL.  239 

As  a  general  rule  time  is  not  of  the  essence  of  a  contract,  but  it 
can  be  made  so  by  agreement.  This  applies  to  bonds  for  title  as 
well  as  to  other  contracts.  Quoting  again  from  Powell's  Actions 
for  Land,  p.  502 : 

"Bonds  for  title  generally  contain  a  condition  that  they  shall 
be  void  if  the  purchase  money  notes  are  not  paid  promptly  at 
maturity.  Such  a  condition  is  in  the  nature  of  a  penalty  or  an 
agreement  for  a  forfeiture.  Ordinarily  time  is  not  of  the  essence 
in  a  contract,  and  penalties  and  forfeitures  are  not  favored. 
Usually  the  measure  of  the  damage  flowing  from  the  failure  to 
pay  money  promptly  at  maturity  is  the  interest  thereon.  There- 
fore, except  in  rare  cases  where  time  is  expressly  made  of  the 
essence  of  the  contract,  when  the  vendee  defaults  in  his  pay- 
ments his  interests  in  the  land  do  not  ipso  facto  terminate,  the 
condition  of  the  bond  to  the  contrary  notwithstanding.  He  may, 
nevertheless,  pay  the  purchase  money  with  interest." 

In  this  connection  it  should  be  noted,  as  said  by  Judge  Powell 
(Actions  for  Land,  p.  503,  note  3)  : 

"Even  in  cases  where  time  is  made  of  the  essence  of  the  con- 
tract, a  waiver  of  the  vendor's  right  to  enforce  a  forfeiture  of 
the  vendee's  privilege  of  paying  up  and  keeping  the  land  will  be 
readily  presumed  and  enforced  by  the  courts.  Any  effort  on  the 
part  of  the  vendor  to  insist  upon  the  payment  of  the  purchase 
money  after  the  time  set  in  the  contract  will  be  construed  to  be 
a  waiver.  If  the  vendor  is  going  to  rescind  for  lack  of  prompti- 
tude of  performance  on  the  vendee's  part,  he  himself  must  mani- 
fest his  election  so  to  claim  by  acting  promptly ;  else  he  will  waive 
his  right  to  do  so." 

So,  that  even  in  a  contract  where  time  is  made  of  the  essence 
the  vendor  must  act  promptly  upon  the  failure  of  the  vendee  to 
pay,  and  if  he  makes  any  effort  at  all  to  collect  the  money  due 
after  it  is  due  he  waives  his  right  to  insist  upon  a  forfeiture  by 
the  vendee. 

Even  where  time  is  of  the  essence  and  the  vendor  has  the  right 
to  declare  a  forfeiture  by  the  vendee,  it  would  be  necessary  for 
the  vendor  to  return  to  the  vendee  the  money  which  he  had  al- 
ready paid  under  the  contract. 

Where  it  is  expressly  provided  in  the  bond  for  title  that  time 
shall  be  of  the  essence  of  the  contract  and  that  if  the  notes  are 
not  paid  at  the  time  specified  the  obligation  shall  be  void  and  of 
no  effect,  and  possession  shall  be  surrendered  upon  demand,  the 
vendor  would  be  entitled  to  declare  a  forfeiture  in  case  the  notes 
were  not  paid  at  maturity,  provided  he  had  done  nothing  toward 
collecting  the  notes  after  they  became  due.  Then  if  the  vendor 
takes  possession  of  the  .land  and  returns  to  the  vendee  the  pur- 


240  PARK'S  BANKING  LAW  OF  GEORGIA. 

chase  money  paid,  he  can  convey  the  title  to  a  third  person.  But 
it  would  be  decidedly  safer,  if  not  necessary,  for  him  to  get 
possession  of  the  bond  for  title,  and  it  would  probably  be  better 
to  insert  in  the  bond  a  statement  that,  in  case  of  default,  the 
vendee  is  to  surrender  the  bond  as  well  as  the  property.  In  the 
event  this  is  done,  I  think  the  title  conveyed  would  be  good. 

Of  course,  the  ordinary  method  provided  in  the  Code  could  be 
adopted  to  clear  the  title  of  the  outstanding  bond  and  recover 
possession  of  the  property: 

"In  cases  where  a  contract  to  purchase  has  been  made  or  bond 
for  title  made,  or  the  purchase  money  has  been  partly  paid,  or  in 
cases  where  a  deed  to  secure  debt  has  been  executed  and  the 
purchase  money  or  secured  debt  has  been  reduced  to  judgment, 
by  the  payee,  assignee  or  holder  of  said  debt,  the  holder  of  the. 
legal  title,  or,  if  dead,  his  executor  or  administrator,  shall  without 
order  of  any  court  make  and  execute  to  said  defendant  in  fi.  fa., 
or  if  he  be  dead  to  his  executor  or  administrator,  a  quit  claim  con- 
veyance to  such  real  or  personal  property,  and  file  and  have  the 
same  recorded  in  the  clerk's  office,  and  thereupon  the  same  may 
be  levied  upon  and  sold  as  other  property  of  said  defendant  and 
the  proceeds  shall  be  applied  to  the  payment  of  such  judgment; 
or  if  there  be  conflicting  claims,  then  the  same  shall  be  applied 
as  determined  in  proceedings  had  for  that  purpose."  Park's  Ann. 
Code,  §  6037. 

Under  this  section,  suit  is  filed  on  the  notes  covered  by  the 
bond,  judgment  obtained,  a  quit  claim  deed  to  the  vendee  filed 
and  recorded,  and  the  property  levied  upon  and  sold  by  the  sheriff 
as  that  of  the  vendee.  At  the  sale  the  vendor  can  buy  it  in  or 
have  some  one  do  so  for  him.  If  the  proceedings  are  regular  and 
in  accordance  with  the  statute,  he  can  then  convey  a  good  title  to 
a  third  person. 


Method  to  Be  Pursued  by  Vendor  in  Recovering  Possession 
of  Land  Under  Bond  for  Title  Upon  Default  in  Payment. 

When  the  holder  of  a  bond  for  title  has  defaulted,  what  is  the  quickest 
way  in  which  the  vendor  of  the  property  can  recover  possession? 

If  the  bond  contains  the  provisions  discussed  in  the  foregoing 
opinion  and  the  owner  complies  with  the  conditions  therein 
stated,  possession  could  be  obtained  at  once,  otherwise  there  is 
no  legal  way  in  which  it  can  be  obtained  except  through  the 
regular  processes  of  the  court.  Probably  the  simplest  way  is  to 
bring  suit  on  the  notes,  secure  judgment,  and  after  filing  and  re- 
cording a  deed  to  the  purchaser,  levy  on  and  sell  the  land.  Where 


OPINIONS  OF  THE  GENERAI,  COUNSEL,.  241 

a  person  enters  into  possession  of  property  under  a  bond  for  title, 
he  can  not  be  summarily  dispossessed  by  a  dispossessory  warrant 
or  other  similar  summary  remedy.  Griffith  v.  Collins,  116  Ga. 
420. 


When  Holder  of  Bond  for  Title  Executes  and  Delivers  a 
Mortgage  on  the  Land  Described  Therein  and  Subse- 
quently Transfers  the  Bond  for  Title,  the  Lien  of  the 
Mortgage  Is  Superior  to  the  Lien  of  the  Transferred 
Bond. 

The  owner  of  land  secures  a  long  loan  on  the  same,  executing  a  deed 
to  secure  debt  to  the  lender  and  taking  a  bond  for  title.  He  then  gives  a 
second  mortgage  covering  the  same  property.  This  mortgage  is  recorded. 
Afterwards  he  transfers  his  bond  for  title  as  security  for  a  debt.  Which 
security  takes  precedence,  the  second  mortgage  or  the  transferred  bond 
for  title? 

It  is  well  settled  that  "the  assignee  of  a  bond  for  title  acquires 
all  the  rights  and  equities  to  which  the  assignor  was  entitled  there- 
under." Walker  v.  Maddox,  105  Ga.  254. 

But  in  this  case  the  obligee  in  the  bond  for  title,  that  is,  the 
original  owner  of  the  land,  has  already  mortgaged  or  incumbered 
his  equity  or  interest  in  the  land  described  in  the  bond,  and  the 
transferee  of  the  bond,  the  mortgage  having  been  recorded,  had 
notice  of  this  incumbrance  at  the  time  he  took  the  bond  as  se- 
curity. He  would,  therefore,  I  think,  take  subject  to  the  rights 
of  the  mortgage  creditor  The  Supreme  Court  has  practically 
decided  the  question,  holding  as  follows : 

"Where  land  is  conveyed  by  deed  to  secure  a  loan,  bond  for 
title  being  given  for  a  reconveyance  to  the  debtor  upon  payment 
of  the  debt,  and  the  latter  transfers  the  bond  to  another,  who  pays 
the  debt  and  takes  a  reconveyance  from  the  creditor,  the  right  of 
a  mortgagee  to  enforce  his  mortgage,  given  upon  the  land  by  the 
debtor  after  the  execution  of  the  security  deed,  depends,  in  the 
absence  of  an  attack  upon  the  bona  fides  of  the  transfer  of  the 
bond  for  title,  upon  whether  the  mortgage  antedates  the  transfer." 
Rountree  v.  Finch,  120  Ga.  743. 

In  the  opinion  in  this  case  the  court  says : 

"If  the  bond  was  transferred  to  her  prior  to  the  execution  of 
the  mortgage,  then,  of  course,  she  took  the  title  unincumbered 
by  the  mortgage.  It  was,  therefore,  essential  to  petitioner's  case 
that  the  petition  should  show  that  the  execution  of  the  mortgage 
antedated  the  transfer  of  the  bond  for  title." 

This  clearly  implies  that  the  converse  of  the  proposition  is  true, 
that  is,  that  if  the  mortgage  was  given  prior  to  the  transfer  of  the 
16 


242  PARK'S  BANKING  LAW  OF  GEORGIA. 

bond  for  title,  it  would  be  superior  to  the  rights  of  the  transferee. 

The  Supreme  Court  has  also  held  that  the  transfer  of  a  bond 
for  title  is  superior  to  a  judgment  against  the  owner  of  the  land, 
and  that  the  judgment  creditor  does  not  have  the  right  to  sub- 
ject the  land  to  the  payment  of  the  judgment  after  the  payment 
of  the  secured  debt  by  the  transferee  of  the  bond  and  the  can- 
cellation of  the  security  deed,  it  not  being  shown  that  the  holder 
of  the  judgment  was  a  creditor  when  the  transfer  was  made. 
Burney  Tailoring  Co.  v.  Cuzzort,  132  Ga.  852. 

These  cases  both  hold  that  the  right  of  the  transferee  of  the 
bond  is  superior  where  the  transfer  is  made  prior  to  the  mortgage 
or  judgment,  and  the  implication  is  strong  that  if  the  mortgage  or 
judgment  were  older  than  the  transfer  of  the  bond,  they  would  be 
superior  to  it. 


BY-LAWS. 


Election  of  Directors  Are  Governed  by. 

Is  a  by-law  valid  which  requires  a  two-thirds  vote  of  the  stockholders 
to  elect  a  board  of  directors? 

Such  a  by-law  provision  with  regard  to  the  election  of  directors 
is  most  unusual.  The  statutes  relating  to  banks  and  other  cor- 
porations require  in  some  instances  that  two-thirds  and  some- 
times three-fourths  of  the  stockholders  must  concur  in  order  to 
authorize  amendments  to  the  charter  or  other  fundamental 
changes  in  the  corporation,  and  it  is  not  unusual  in  charters 
granted  by  the  superior  courts  to  provide  that  the  stockholders 
by  a  two-thirds  vote  may  dissolve  the  corporation,  accept  amend- 
ments to  its  charter,  or  do  other  things  of  like  character.  But 
while  it  is  unusual  to  provide  by  the  by-laws  that  a  two-thirds  vote 
of  the  stockholders  shall  be  required  for  the  election  of  directors, 
there  is  no  reason  why  such  a  provision  can  not  be  made.  The 
law  certainly  does  not  fix  the  number  of  votes  or  the  proportion 
of  stockholders  required,  and,  therefore,  the  matter  is  left  to  the 
stockholders  themselves,  who  may  make  any  limitations  on  their 
own  rights  which  they  may  deem  fit  and  proper. 

In  the  recent  work  of  Machen  on  the  Modern  Law  of  Cor- 
porations, §  1240,  it  is  said: 

"A  majority  of  the  members  present,  provided  they  be  a 
quorum,  and  unless  a  heavier  preponderance  be  expressly  required 


OPINIONS  of  THE  GENERAL,  COUNSEL.  243 

by  statute  or  the  company's  regulations,  determines  the  action  of 
the  meeting." 

Quoting  from-  the  Supreme  Court  of  Pennsylvania : 

"A  corporation  is  a  voluntary  association  of  persons  engaged  in 
a  common  enterprise.  When  the  methods  of  voting  are  not 
fixed  by  general  law,  the  corporators  may  make  the  law  for 
themselves,  subject  to  the  qualification  that  such  laws  and  regu- 
lations as  they  make  shall  not  conflict  with  the  laws  of  the  State 
or  of  the  United  States.  [The  by-law  regulation  in  this  case  was 
that  the  stockholders  should  have  one  vote  for  each  share  of  stock 
up  to  ten,  and  a  certain  proportion  beyond  that  number.  The 
court  continues.]  This  is  a  reasonable  regulation,  it  is  uniform 
in  its  operation,  it  conflicts  with  no  law,  and  it  is  binding  on  all 
the  stockholders."  Detwiler  v.  Commonwealth,  18  Atl.  990. 

I  see  no  reason,  therefore,  why  the  stockholders  cannot  adopt 
a  by-law  which  requires  a  vote  of  two-thirds  in  order  to  elect 
directors ;  and  such  a  by-law  when  regularly  adopted  would  be- 
come the  law  of  the  corporation  by  which  all  stockholders  would 
be  bound. 


Lien  Created  by  By-law  Cannot  Be  Asserted  Against  Holder 
Without  Notice  Thereof. 

Is  the  stock  of  a  corporation  upon  which  there  is  a  by-law  lien  good 
collateral  security  in  the  hands  of  an  innocent  holder,  no  notice  being 
given  to  such  holder  that  the  corporation  reserves  said  lien? 

A  by-law  lien  cannot  be  asserted  on  stock  in  the  hands  of  an 
innocent  holder  who  had  no  notice  of  the  lien.  Section  3375 
of  Park's  Ann.  Code  provides  that  such  lien  "is  binding  upon  the 
corporators  themselves,  and  upon  all  creditors  giving  credit  with 
notice,  or  purchasers  at  public  or  private  sale  purchasing  with 
notice."  It  has  been  held  by  the  Supreme  Court  that  notice  of 
the  lien  is  essential  to  render  it  valid  as  against  a  creditor.  I 
quote  from  the  decision  in  the  case  of  Bank  of  Culloden  v.  Bank 
of  Forsyth,  120  Ga.  575 : 

"Where  notice  of  a  by-lav/  lien  is  given  in  the  face  of  a  stock 
certificate,  the  transferee  takes  subject  to  any  debt  due  by  the 
stockholder  to  the  corporation  at  the  time  of  the  transfer,  or 
which  may  arise  before  the  corporation  has  notice  of  the  transfer 
of  the  scrip. 

"But  where  the  certificate  makes  no  reference  to  the  existence 
of  the  lien,  a  pledgee  or  transferee  of  corporate  stock  is  not  af- 
fected by  the  terms  of  a  by-law  lien  of  which  he  has  no  notice. 

"A  statement  in  a  stock  certificate  that  the  same  is  'transferable 
only  on  the  books  of  the  corporation,  in  person  or  by  attorney,  on 


244  PARK'S  BANKING  LAW  OF  GEORGIA. 

surrender  of  the  certificate'  does  not  charge  the  transferee  with 
notice  of  what  is  on  the  books  of  the  company,  or  of  the  exist- 
ence of  the  lien,  or  of  the  fact  of  the  stockholder's  indebtedness  to 
the  company." 

This  decision  and  the  section  of  the  Code  seem  to  settle  the 
question. 


Transferror  of  Stock  Subject  to  By-law  Lien  Is  not  Liable 
to  Criminal  Prosecution. 

Is  a  stockholder  transferring  as  collateral  to  a  third  person  stock  upon 
which  there  is  a  by-law  lien,  liable  to  prosecution  for  making  the  transfer? 

I  do  not  think  a  stockholder  transferring  as  collateral  stock 
upon  which  there  exists  a  by-law  lien  would  be  subject  to  a  crimi- 
nal prosecution  at  the  instance  of  the  bank  or  corporation.  It 
would  take  a  statute  to  make  such  a  transfer  criminal,  and  I  know 
of  no  statute  on  the  subject. 


By-law  Lien  Does  not  Affect  Purchaser  at   Judicial   Sale 
Unless  He  Has  Notice. 

A  stockholder  owes  the  bank  in  which  he  holds  stock.  The  by-laws  of 
the  bank  create  a  lien  on  its  stock  in  its  favor.  The  stock  certificate  makes 
no  reference  to  the  by-law  lien.  What  are  the  rights  of  the  bank  under  its 
by-law  lien  .as  against  a  purchaser  of  the  stock  at  a  judicial  sale  under  a 
fi.  fa.  obtained  against  the  stockholder  before  he  bought  the  stock? 

The  provision  of  law  applicable  is  as  follows : 

"The  by-laws  of  a  corporation  may  create  a  lien  upon  the 
shares  or  other  property  of  the  stockholders  in  favor  of  the  com- 
pany; such  lien  is  binding  upon  the  corporators  themselves  and 
upon  all  creditors  giving  credit  with  notice,  or  purchasers  at  public 
or  private  sale  purchasing  with  notice."  §  3375  Park's  Ann. 
Code. 

It  will  be  seen  from  this  section  that  the  rights  of  the  purchaser 
of  the  stock  at  the  sheriff's  sale  depend  upon  whether  or  not  he 
had  notice  of  the  by-law  lien.  Of  course,  if  the  bank  gave  him 
notice  at  the  sale  that  it  had  a  lien  upon  the  stock,  or  if  he  ac- 
quired notice  in  any  other  way,  then  he  would  buy  subject  to  the 
lien  of  the  bank.  If,  however,  the  purchaser  had  no  notice 
prior  to  the  sale,  by  reference  in  the  stock  certificate  or  otherwise, 
that  the  by-laws  of  the  bank  gave  it  a  lien  on  the  stock,  his  rights 
would  be  superior  to  the  rights  of  the  bank  under  its  lien. 

NOTE.— Under  §  88  of  the  Banking  Act  of  1919,  (§  10,  Art.  8),  a 
bank  incorporated  under  that  act  can  not  retain  or  enforce  a  lien  on  its 
stock  by  by-law  or  otherwise  except  for  unpaid  installments  due  thereon. 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  245 

CASHIER. 


Has  no  Power  by  Virtue  o£  His  Office  to  Bind  Bank  by  Con- 
tract Except  in  the  Discharge  of  His  Ordinary  Duties. 

Has  a  cashier  power  to  bind  a  bank  by  ordinary  contracts  made  on  its 
behalf  by  him? 

The  power  of  a  cashier  to  make  contracts  for  a  bank  is  rather 
fully  stated  in  Michie  on  Banks  and  Banking,  p.  737,  from  which 
I  quote: 

"In  order  to  bind  the  bank  by  any  contract  that  he  may  make, 
the  cashier  must  keep  within  the  usual  and  apparent  scope  of  his 
authority.  Without  special  authority  from  the  board  of  directors, 
express  or  implied,  he  can  not  make  for  his  bank  a  contract  in 
regard  to  a  subject  matter  outside  the  usual  and  customary  busi- 
ness of  the  bank,  and  outside  the  business  usually  performed  by 
cashiers.  The  actual  powers  and  duties  of  the  cashier,  like  those 
of  all  other  agents,  may  be  more  or  less  qualified,  restricted  or 
enlarged  by  the  corporation,  institution  or  party  for  whom  he  acts. 
Any  restriction  upon  his  usual  and  customary  authority,  to  be 
binding  upon  third  persons  dealing  with  the  bank  through  him. 
must  be  brought  to  their  knowledge,  for  where  a  party  deals 
with  the  cashier  of  a  bank  in  good  faith,  without  notice  of  any 
want  of  authority  on  his  part,  and  the  act  done  is  within  the 
apparent  scope  of  his  authority,  the  bank  is  bound  by  the  contract. 
On  the  other  hand,  Contracts  not  within  the  scope  of  the  powers 
ordinarily  incident  to  the  office  of  a  cashier  will  be  binding  upon 
the  bank  where  authority  to  enter  into  such  contracts  on  behalf 
of  the  bank  has  been  expressly  conferred,  or  where  he  has  been 
held  out  to  the  public  as  having  *  such  authority  by  a  previous 
course  of  dealing.  In  short,  any  contract  is  binding  on  a  bank, 
made  by  its  cashier  acting  within  the  reasonable  or  apparent 
scope  of  his  authority,  or  made  by  him  when  acting  with  the 
knowledge  and  approval  of  the  directors,  or  like  others  which  he 
had  been  accustomed  to  make  with  their  approval,  or  that  was 
afterwards  ratified  by  the  bank's  availing  itself  of  the  benefits  of 
such  contract.  And  where  the  directors  of  a  bank  allow  the 
cashier  to  take  the  general  charge  and  management  of  the  busi- 
ness and  contracts  of  the  bank,  all  his  contracts  made  within  the 
scope  of  the  powers  of  the  bank  are  binding  upon  it." 

On  page  742  of  the  same  work  is  the  following  succinct  state- 
ment of  the  power  of  the  cashier  of  a  bank  to  bind  it  by  a  con- 
tract for  the  payment  of  money : 

"A  cashier  of  a  bank  has  no  power,  by  virtue  of  his  office,  to 
bind  the  corporation  except  in  the  discharge  of  his  ordinary 
duties,  and  the  ordinary  business  of  a  bank  does  not  comprehend 


246  PARK'S  BANKING  LAW  OF  GEORGIA. 

a  contract  made  by  a  cashier — without  delegation  of  power  by 
the  board  of  directors — involving  the  payment  of  money  not 
loaned  by  the  bank  in  the  customary  way." 

These  quotations  state  the  rule  as  generally  accepted  and  an- 
swer the  question. 


Cashier  Has  no  Authority  to  Draw  Checks  on  Bank's  Cor- 
respondents in  His  Own  Favor. 

Is  it  legal  for  a  cashier  to  draw  on  the  bank's  New  York  correspondent, 
making  the  check  payable  to  himself  individually? 

It  is  a  general  and  well  recognized  rule  that  an  offcer  can  not 
occupy  a  dual  position  and  represent  both  himself  and  the  bank 
in  any  transaction  with  it.  Thus,  though  a  cashier  or  other  officer 
may  have  power  to  make  loans  for  the  bank,  he  can  not  lend  to 
himself,  and  it  has  been  held  frequently  that  a  cashier  can  not 
certify  a  check  payable  to  himself,  and  that  where  he  attempts 
to  do  so  there  can  not  be  a  bona  fide  holder  of  such  check.  I 
quote  (substantially)  from  Michie  on  Banks  and  Banking,  p. 
1172: 

"Where  the  face  of  the  check  shows  the  officer's  attempt  to  use 
his  official  character  for  his  private  benefit,  every  one  to  whom  it 
comes  is  put  upon  inquiry,  and  when  the  certificate  is  false  no  one 
can  recover  against  the  bank  as  a  bona  fide  holder." 

This  principle  is  applicable  to  the  bank's  checks  drawn  in  favor 
of  the  cashier.  While  the  cashier  may  have  authority  to  draw 
checks  on  the  bank's  correspondents,  he  would  not  have  author- 
ity to  draw  checks  for  his  own  .benefit,  and  any  one  taking  such  a 
check  would  do  so  at  his  own  risk,  being  put  on  inquiry  by  the 
fact  that  the  officer  drawing  the  check  appears  to  be  acting  in  his 
own  interest  in  so  doing. 

While  I  have  found  no  case  in  which  the  precise  question  has 
been  decided,  nor  any  discussion  of  it  by  the  text  writers,  the 
principle  stated,  which  is  well  established  in  the  case  of  dealings 
between  bank  officers  and  the  bank,  undoubtedly  controls. 


Cashier  can  not  Make  Certificate  of  Deposit  Payable  to 

Himself. 

What  would  be  the  legal  status  of  a  time  certificate  of  deposit  issued 
by  a  cashier  to  himself  for  which  no  deposit  was  made  and  no  entry 
whatever  made  on  the  books  of  the  bank?  Would  the  fact  that  the  cer- 
tificate is  signed  by  the  cashier  and  made  payable  to  his  own  order  be 


OPINIONS  OF  THE  GENERAL  COUNSEL.  247 

sufficient  to  put  another  bank  on  notice  and  prevent  it  from  being  a  bona 
fide  holder  of  such  certificate? 

Under  the  principles  stated  in  the  foregoing  opinion,  a  cashier 
cannot  issue  a  certificate  of  deposit  payable  to  himself  and  there 
can  be  no  bona  fide  holder  of  such  a  certificate. 

Of  course  the  directors  of  a  bank  might  give  to  the  cashier 
authority  to  certify  his  own  check  or  to  issue  to  himself  certifi- 
cates of  deposit,  and  this  authority  might  be  given  by  implication 
by  recognizing  his  certification  or  his  certificates  for  a  consid- 
erable period  of  time.  Where  such  authority  is  given,  either  ex- 
pressly or  by  implication,  the  bank  might  be  compelled  to  pay  a 
certificate  although  it  was  fraudulently  issued.  But  where  no 
authority  had  been  given  in  any  way  and  the  certificate  of  deposit 
was  issued  without  any  deposit  having  been  made,  I  do  not  think 
the  bank  would  be  liable  or  that  any  one  taking  the  certificate 
could  claim  successfully  to  be  a  bona  fide  holder. 


CASHIER'S  CHECK. 


Good  in  Hands  of  Bona  Fide  Holder  Although  Obtained  by 
Misrepresentations. 

A  bank  issues  its  cashier's  check,  which  the  payee  cashes  at  another 
bank.  The  bank  cashing  the  check  forwards  it  to  the  bank  on  which  it  is 
drawn.  This  bank  refuses  payment,  on  the  ground  that  the  check  was 
obtained  by  misrepresentation.  Can  the  bank  which  cashed  the  check 
collect  it  from  the  bank  which  issued  it  ?  Would  suit  have  to  be  brought 
first  against  the  original  payee,  who  indorsed  the  check? 

A  cashier's  check  is  a  negotiable  instrument,  and  like  other 
negotiable  instruments  is  not  subject  to  defenses  between  the 
original  parties  where  held  by  a  bona  fide  purchaser  for  value 
without  notice  of  such  defenses.  There  is  nothing  peculiar  or 
sacred  about  a  cashier's  check.  It  stands  on  the  same  footing 
as  the  check  of  an  ordinary  person,  the  drawer  being  liable  where 
the  check  is  in  the  hands  of  a  bona  fide  holder.  A  bank  could  not 
plead  as  against  such  holder  that  its  cashier's  check  was  obtained 
by  false  representations.  Of  course,  if  the  circumstances  were 
such  as  to  arouse  the  suspicions  of  the  purchasing  bank  and  to  in- 
dicate that  there  was  something  fraudulent  in  the  transaction,  the 
bank  would  not  be  a  bona  fide  holder. 

It  is  not  necessary  that  suit  should  be  brought  against  the  in- 
dorser  before  suing  the  drawer  of  a  check.  Indeed,  the  drawer 


248  PARK'S  BANKING  LAW  o?  GEORGIA. 

is  the  party  primarily  liable,  and  while  both  can  be  sued  in  the 
same  action,  it  would  be  proper  to  exhaust  the  drawer  before 
going  on  the  indorser,  though  it  is  not  necessary  that  this  should 
be  done. 


CERTIFICATE  OF  DEPOSIT. 


Certificate  of  Deposit  of  Insolvent  Bank  Ranks  as  General 

Deposit. 

Do  certificates  of  deposit  of  an  insolvent  bank  rank  as  deposits?  Is  there 
any  distinction  between  certificates  of  deposit  and  general  deposits,  in  the 
payment  of  dividends? 

The  Supreme  Court  has  held  that  the  holders  of  certificates  of 
deposit  are  depositors  within  the  meaning  of  the  statute,  imposing 
on  stockholders  a  statutory  liability  for  the  payment  of  the  de- 
positors. Lamar  v.  Taylor,  141  Ga.  227  (6).  Under  this  de- 
cision, there  is  no  distinction  between  certificate  holders  and 
general  depositors.  Dividends  should  be  paid  on  all  deposits 
whether  represented  by  certificate  or  by  pass  book,  pro  rata, 
without  distinction  or  priority. 

NOTE. — Under  the  Banking  Act  of  1919,  §  2,  the  term  "depositor"  in- 
cludes the  holders  of  demand  and  time  certificates  of  deposit  lawfully  is- 
sued. 


Deposit  in  Name  of  Husband  to  Be  Paid  to  His  Wife  in  the 
Event  of  His  Death  Must  Be  Paid  to  His  Administrator 
and  not  to  Wife. 

A  person  deposits  a  sum  in  bank,  taking  an  interest-bearing  certificate  of 
deposit,  payable  to  the  order  of  himself,  or  in  the  event  of  his  death,  to  his 
wife.  The  depositor  dies  intestate.  Can  the  widow  draw  the  money  on 
the  certificate,  or  can  the  money  be  drawn  only  by  the  administrator  of 
the  depositor? 

I  quote  from  Michie  on  Banks  and  Banking,  Volume  II,  p. 
1283: 

"A  certificate  of  deposit  payable  to  the  order  of  the  depositor 
or  his  wife  may  be  paid  to  the  wife.  But  where  the  depositor  de- 
posited money  in  a  bank  and  received  a  certificate  of  deposit 
payable  to  the  order  of  himself,  or  his  wife,  on  the  return  of  the 
certificate,  the  bank  is  liable  for  paying  to  the  wife  after  notice 
of  the  death  of  the  depostor;  and  notice  to  the  paying  teller  is 
notice  to  the  bank." 


OPINIONS  OF  THE  GENERAL  COUNSEL.  249 

This  statement  is  based  on  the  case  of  Second  National  Bank  v. 
Wrightston,  63  Md.  81. 

The  precise  question  has  been  decided  by  the  Court  of  Appeals 
of  New  York  in  the  case  of  Sullivan  v.  Sullivan,  56  N.  E.  116.  I 
quote  the  headnotes  in  this  case : 

"The  deposit  of  money  in  a  bank,  and  the  issuance  of  a  certifi- 
cate payable  to  the  depositor,  or,  in  case  of  her  death,  to  an- 
other, do  not,  where  there  is  no  consideration  therefor,  constitute 
a  valid  contract  between  the  depositor  and  the  bank  for  the  benefit 
of  the  other,  which  the  latter  can  enforce  on  the  depositor's  death 
before  the  sum  is  withdrawn. 

"The  deposit  of  a  fund  in  a  bank,  and  the  issuance  of  a  cer- 
tificate payable  to  the  depositor,  or,  in  case  of  her  death,  to  an- 
other, do  not  create  a  trust  in  favor  of  the  other,  where  there  is 
no  intention,  express,  or  implied,  to  immediately  transfer  the  title 
to  the  fund  to  the  latter  or  to  the  bank,  except  as  the  depositary 
and  debtor  of  the  depositor." 

The  Supreme  Court  of  Iowa  in  the  case  In  Re  Brown's  Estate, 
113  Iowa  351,  86  N.  W.  617,  also  decided  that  a  certificate  issued 
jointly  in  the  names  of  the  depositor  and  his  wife,  the  depositor 
stating  to  the  bank  at  the  time  that  the  certificate  was  so  taken  to 
enable  the  wife  to  draw  the  money  on  his  death,  did  not  create  a 
trust  in  favor  of  the  wife,  and  that  the  fund  belonged  to  the  hus- 
band's estate. 

I  do  not  think  the  question  has  been  decided  in  Georgia,  but 
the  principles  upon  which  the  cases  above  referred  to  were  de- 
cided are  well  recognized  in  this  State. 

Of  course,  a  special  contract  based  on  a  valid  consideration 
might  be  made,  by  which  the  title  to  the  deposit  would  pass  to 
a  third  person,  and  the  bank  under  such  circumstances  would  be 
authorized  to  pay  regardless  of  the  death  of  the  depositor.  Again, 
a  husband  might  make  a  valid  gift  to  his  wife  in  the  form  of  a 
deposit  in  bank,  which  she  could  draw  after  his  death.  In  such 
case,  however,  it  would' be  necessary  that  the  title  to  the  fund 
should  vest  in  the  wife  at  the  time  the  gift  is  made,  and  not  at 
the  death  of  the  depositor.  A  gift  to  take  effect  at  the  death  of  the 
donor  can  only  be  made  by  will,  and  a  bank  could  not  be  ap- 
pointed an  agent  to  transfer  to  another  a  deposit  after  his,  the 
depositor's  death,  because  death  would  revoke  the  agency. 

NOTE. — Under  the  Banking  Act  of  1919,  §  183,  when  a  deposit  is  made  in 
the  names  of  two  persons,  payable  to  either  or  the  survivor,  the  deposit 
may  be  paid  to  either  whether  the  other  be  living  or  not. 


250  PARK'S  BANKING  LAW  OF  GEORGIA. 

Certificate  of  Deposit  Should  not  Be  Paid  Without  Production 
and  Surrender  of  Certificate. 

The  payee  of  a  time  certificate  payable  to  order  dies  before  its  maturity. 
Can  the  administrator  of  the  payee  enforce  payment  of  the  certificate  with- 
out producing  and  surrendering  it? 

The  bank  should  decline  to  pay  the  amount  until  the  certificate 
is  produced  and  delivered.  The  certificate  being  payable  to  order 
is  negotiable,  and  if  it  should  have  gotten  into  the  hands  of  an 
innocent  holder  before  its  maturity,  payment  to  the  administrator 
of  the  deceased  holder  would  be  no  protection.  If  the  adminis- 
trator cannot  produce  the  certificate,  the  bank  should  decline  to 
pay  it  unless  it  is  established  in  the  way  provided  by  law.  Before 
a  lost  paper  of  this  character  could  be  established  the  court  would 
require  satisfactory  proof  that  the  certificate  was,  in  fact,  lost, 
and  that  it  had  not  been  transferred  and  was  not  in  the  hands  of 
an  innocent  holder.  And  a  bond  sufficient  to  protect  the  bank 
in  the  payment  would  be  required.  This  is  the  only  safe  course 
to  be  pursued  under  the  circumstances. 


Bank  Must  Know  Signature  of  Payee  of  Certificate  of  Deposit. 

Is  a  bank  bound  to  know  the  signature  of  the  payee  of  a  certificate  of 
deposit  issued  by  the  bank  itself? 

A  bank  is  bound  to  know  the  signature  of  the  payee  of  a  cer- 
tifiicate  of  deposit.  I  quote  from  Magee  on  Banks  and  Banking, 
p.  377: 

"It  (a  certificate  of  deposit)  must  be  paid  to  the  owner.  The 
instrument  being  transferable,  if  presented  for  payment  by  a 
person  other  than  the  person  named  in  the  certificate  as  payee, 
the  bank  must,  before  payment,  satisfy  itself  that  the  transfer 
and  assignment  is  genuine,  that  the  signature  is  the  signature  of 
the  payee  named  in  the  certificate.  The  bank  is  held  to  the  same 
degree  of  care  in  payment  of  a  certificate  as  it  is  in  payment 
of  checks.  If  it  pays  a  forged  check,  the  money  is  not  trans- 
ferred. If  the  assignment  on  the  certificate  is  a  forgery,  the  true 
owner  of  the  certificate  can  recover." 

And  it  has  been  held  that  "a  bank  is  bound  to  know  the  hand- 
writing of  the  payee  of  a  certificate  of  deposit  issued  by  it,  and 
is  liable  for  all  forged  signatures  accepted  as  genuine."  Stout  v. 
Benoist,  39  Mo.  277,  90  Am.  Dec.  468.  In  this  case,  which  seems 
to  be  inline  with  the  rulings  of  the  courts  of  last  resort  in  other 
States,  it  is  said  that  "considerations  of  convenience  and  public 


OPINIONS  OF  THE  GENERAL  COUNSEL.  251 

policy  imperatively  demand  and  require  this  rule.  Bankers  have 
the  means  in  their  own  hands,  by  acquiring  an  intimate  knowledge 
of  the  signatures  of  their  customers,  of  protecting  and  securing 
themselves  against  impositions  and  forgeries.  They  alone  possess 
the  means  of  knowing,  when  paper  is  presented  to  them,  whether 
the  signatures  or  indorsements  are  genuine.  And  if  these  means 
are  not  employed,  it  is  evidence  of  a  neglect  of  duty  which  the 
public  has  a  right  to  require  of  them  for  its  safety." 


Bona  Fide  Holder  of  Certificate  of  Deposit  Is  Protected. 

A  bank  is  a  bona  fide  holder  of  a  certificate  of  deposit  issued  by  an- 
other bank.  The  issuing  bank  is  garnished  as  a  debtor  of  the  person  to 
whom  the  certificate  was  issued  after  the  first  bank  acquires  the  certificate. 
How  can  the  bank  holding  the  certificate  protect  itself? 

The  bank,  as  the  purchaser  of  a  negotiable  instrument  without 
notice,  helds  the  same  superior  to  any  equities  which  may  exist 
between  the  issuing  bank  and  the  original  holder  of  the  certificate, 
and  would  be  protected  against  a  garnishment  sued  out  against 
such  holder.  If  the  issuing  bank  refuses  to  pay  the  certificate  on 
account  of  the  garnishment,  the  other  bank  can  claim  the  money 
in  the  garnishment  proceedings  and  have  the  garnishment  released 
by  the  filing  of  a  claim  bond.  There  would  be  no  risk  in  giving 
such  a  bond  under  the  circumstances,  and  this  would  be  the 
simplest  and  certainly  the  quickest  way  of  getting  the  money  on 
the  certificate.  The  issuing  bank  would  probably  be  justified  in 
refusing  to  pay  the  certificate  so  long  as  the  garnishment  is  out- 
standing and  undissolved,  as  it  would  not  feel  like  assuming  the 
burden  of  deciding  whether  the  other  bank  is  a  bona  fide  holder. 


CERTIFICATION  OF  CHECKS. 


Check  Can  Not  Be  Certified  by  Telephone  or  Telegraph. 

Can  a  check  be  certified  by  telephone  or  telegraph? 

I  direct  attention  to  a  few  of  the  leading  authorities  on  bank- 
ing: 

"The  act  by  which  the  bank  places  itself  under  obligation  to 
pay  to  the  holder  the  sum  called  for  by  a  check  must  be  the  ex- 
pressed promise  or  undertaking  of  the  bank  signifying  its  intent 


252  PARK'S  BANKING  LAW  OF  GEORGIA. 

to  assume  this  obligation,  or  some  act  from  which  the  law  will  im- 
peratively imply  such  valid  promise  or  undertaking.  The  most 
ordinary  form  which  such  an  act  assumes  is  the  acceptance  by  the 
bank  of  the  check,  or,  as  it  is  perhaps  more  often  called,  the  cer- 
tifying of  the  check.  A  check  is  not  an  instrument  which  in  the 
ordinary  course  of  business  calls  for  acceptance.  The  holder  can 
never  claim  acceptance  as  his  legal  right.  He  can  present  for 
payment,  and  only  for  payment.  But  on  the  other  hand  there  is 
nothing  in  the  nature  of  a  check  which  intrinsically  precludes  its 
acceptance  in  like  manner  and  with  like  effect  as  a  bill  of  ex- 
change or  draft  may  be  accepted.  The  bank  may  accept  if  it 
chooses ;  and  it  is  frequently  induced  by  convenience,  by  the  exi- 
gencies of  business,  or  by  the  desire  to  oblige  customers,  volun- 
tarily to  incur  the  obligation.  *  *  *  The  law  in  England 
used  to  allow  parol  acceptance;  but  the  Statutes,  Ibt  and  2d 
George  IV,  and  20th  Viet,  require  an  acceptance  in  writing. 
Some  of  the  States  of  the  Union  have  enacted  laws  to  a  similar 
effect.  In  New  York  a  statute  requires  acceptance  of  a  bill  of 
exchange  to  be  made  in  writing,  and  the  courts  h^ve  held  that 
a  check  is  so  far  like  a  bill  of  exchange  as  to  fall  within  this  stat- 
ute, and  that  the  verbal  promise  of  the  bank  to  pay  it  is  of  no  ef- 
fect." Morse  on  Banks  and  Banking,  §§  404,  407. 

"When  the  statute  of  a  State  does  not  provide  that  an  accept- 
ance of  a  bill  of  exchange  or  check  shall  be  made  in  writing,  a 
verbal  acceptance,  when  proved,  is  good.  *  *  *  The  courts 
say  that  it  is  fully  settled,  both  in  England  and  in  the  United 
States,  that  in  the  absence  of  a  statute  an  oral  acceptance  of  a 
bill  of  exchange  will  bind  the  acceptor."  Magee  on  Banks  and 
Banking,  §  197. 

This  quotation  is  taken  from  a  general  discussion  of  certified 
checks : 

"An  acceptance  is  generally  in  writing,  and  in  some  States 
such  an  acceptance  is  required  by  the  statute  of  frauds;  other- 
wise this  may  be  done  verbally."  Bolles  on  the  Modern  Law  of 
Banking,  p.  699. 

The  statute  of  frauds  of  Georgia  requires  the  acceptance  of  a 
bill  of  exchange  to  be  in  writing.  §  3222  (8)  Park's  Ann.  Code. 

The  Supreme  Court  of  Georgia  has  not  been  called  on  to  decide 
whether  or  not  the  certification  of  a  check  must  be  in  writing,  but 
all  the  authorities  treat  the  certification  of  a  check  as  practically 
the  same  as  the  acceptance  of  a  bill  of  exchange,  and  the  courts 
generally  have  held  that  where  the  statute  of  frauds  requires  the 
acceptance  of  a  bill  of  exchange  to  be  in  writing,  the  certification 
must  also  be  in  writing. 

Whatever  doubt  may  have  existed  on  the  question  was  removed 
by  the  Act  of  1907  (Park's  Ann.  Code,  §  2301,  reenacted  in  the 


OPINIONS  of  THE  GENERAL  COUNSEL.  253 

Banking  Act  of  1919,  §  181),  which  provided  that  "Such  certifi- 
cation shall  be  entered  on  the  face  of  such  check,  draft  or  order." 
Certainly  since  this  act  there  can  be  no  certification  by  telephone 
or  telegraph. 


Agreement  Among  Banks  to  Certify  by  Telephone. 

Can  the  banks  of  a  particular  city  make  an  agreement  that  certification 
of  checks  by  telephone,  by  the  proper  officers,  shall  be  as  binding  on  the 
banks  as  if  the  certification  was  in  writing? 

I  do  not  think  banks  can  certify  in  this  way.  The  certifica- 
tion of  a  check,  as  I  understand  it,  is  more  than  an  agreement  to 
pay.  In  effect  it  is  a  statement  by  the  bank  that  the  check  is 
genuine  and  that  the  drawer  has  sufficient  funds  on  hand  to  meet 
it,  as  well  as  an  agreement  on  the  part  of  the  bank  to  pay  the 
check.  I  do  not  see  how  a  bank  can  certify,  technically,  without 
seeing  the  check,  as  it  cannot  possibly  know  whether  the  check  is 
genuine.  But  I  see  no  reason  why  the  banks  of  a  particular  city 
might  not  agree  to  make  themselves  liable  one  to  another  to  pay 
checks  of  their  customers  when  requested  to  do  so  by  telephone. 
They  could  undoubtedly  make  themselves  liable  to  pay  under  such 
an  agreement.  What  position  a  bank  under  such  circumstances 
might  occupy  with  the  depositor  is  another  question.  The  de- 
positor might  take  the  position  that  the  bank  had  no  right  to 
certify  a  check  unless  the  check  itself  was  presented  for  the 
purpose,  and  that,  having  no  right  to  certify,  it  would  have  no 
right  to  charge  the  amount  to  the  depositor's  account.  I  am  in- 
clined to  think  that  the  bank  could  hold  a  suffcient  amount  of  the 
deposit  to  cover  checks  which  it  had  agreed  to  pay  in  this  way. 
but  the  diffculty  can  be  readily  appreciated.  On  the  whole,  such 
certification  being  irregular  and  unauthorized,  I  doubt  whether 
the  convenience  would  justify  the  banks  in  making  such  an  agree- 
ment as  that  suggested. 

It  would  seem  better  for  the  banks  to  agree  among  themselves 
to  a  quasi  certification  subject  to  prior  withdrawal  by  the  de- 
positor, the  certification  being  also  conditioned  upon  the  paper 
being  genuine  and  regular  in  all  respects.  What  a  bank  generally 
wants  to  know  is  whether  the  customer  has  the  money  to  his 
credit  at  the  time  the  question  is  asked,  and  I  think  the  banks 
might  agree  to  give  this  information ;  but  I  do  not  believe  it 
would  be  best  to  enter  into  a  binding  obligation  to  pay  the  check 
unless  it  is  certified  regularly. 


254  PARK'S  BANKING  LAW  of  GEORGIA. 

Payment  Can  Not  Be  Stopped  on  Certified  Check. 

.  Can  payment  be  stopped  on  a  certified  check? 

The  certification  of  a  check  makes  the  bank  liable  for  its  pay- 
ment, and  relieves  the  drawer  of  all  obligation  thereon.  The 
check  is  immediately  charged  to  the  drawer's  account,  and  to  all 
intents  and  purposes  is  paid  so  far  as  he  is  concerned.  He  would 
not  have  the  right  to  stop  payment  on  such  check,  and  as  the  bank 
by  certifying  the  check  becomes  primarily  liable  for  its  payment, 
and  as  it  has  the  funds  with  which  to  pay  it,  it  is  hard  to  imagine 
any  circumstance  which  would  authorize  the  bank  to  stop  pay- 
ment. This  does  not  mean  that  there  might  not  be  some  circum- 
stances under  which  a  bank  would  be  authorized  to  refuse  to  pay 
a  certified  check.  For  instance,  if  the  person  getting  the  check 
certified  was  guilty  of  some  fraud  on  the  bank,  the  bank  would 
be  authorized  to  refuse  payment  so  long  as  the  check  remained  in 
the  hands  of  the  fraudulent  holder.  I  understand  the  question  to 
be,  however,  whether  the  drawer  of  a  check  can  stop  payment 
after  the  same  has  been  certified.  As  stated,  the  drawer  is  no 
longer  liable  on  the  check  and  has  no  control  over  it. 


Notice  by  Drawer  to  Payee  that  Payment  Would  Be  Stopped 
Would  not  Prevent  Bank  from  Certifying. 

A  gives  a  check  to  B  in  connection  with  a  business  transaction  between 
the  two.  A  becomes  dissatisfied  and  notifies  B  that  he  (A)  is  going  to 
stop  payment  on  the  check.  B  gets  to  the  bank  before  A  does  and  has  the 
check  certified.  Can  the  bank  be  compelled  to  pay  the  check  thus  certi- 
fied? 

The  law  requires  that  as  soon  as  a  check  is  certified  it  shall  be 
charged  at  once  to  the  drawer's  account.  The  check  then  becomes 
the  primary  obligation  of  the  bank.  The  drawer  cannot  stop  pay- 
ment of  it,  and  the  bank  is  liable  for  it  to  the  same  extent  that  it 
would  be  if  it  was  the  bank's  own  check.  The  fact  that  the 
drawer  may  have  told  the  payee  that  he  intended  to  stop  pay- 
ment would  not  change  the  situation  at  all,  the  check  having  been 
certified  by  the  bank  without  any  notice  of  the  drawer's  inten- 
tion to  revoke  or  stop  payment.  Nor  would  the  fact  that  the 
check  was  obtained  by  fraud,  or  that  the  original  transaction  out 
of  which  it  was  given  was  fraudulent,  make  any  difference. 

I  do  not  think  the  bank  could  do  otherwise  than  pay  the  check 
when  presented. 


OPINIONS  '  of  THE  GENERAL  COUNSEL.  255 

Payment  Can  Not  Be  Stopped  on  Check  Certified  After 
Business  Hours. 

If  a  bank  certifies  a  check  after  business  hours,  can  the  drawer  stop 
payment  on  it? 

I  know  of  no  reason  why  a  bank  may  not  certify  a  check  after 
business  hours,  nor  any  reason  why  the  drawer  of  the  check  has 
any  more  right  to  stop  payment  on  a  check  issued  after  banking 
hours  than  he  has  on  one  issued  during  such  hours.  The  certifica- 
tion of  a  check  as  between  the  bank  and  depositor  is  equivalent  to 
paying  the  check,  and  there  is  no  reason  why  a  bank  cannot  pay  a 
check  out  of  banking  hours.  Certainly  if  a  bank  can  pay  a  check 
out  of  business  hours,  it  would  have  the  right  to  do  what  is 
equivalent  to  its  payment.  Of  course  a  bank  is  not  obliged  to 
certify  or  pay  a  check  after  banking  hours.  It  has  a  perfect  right 
to  transact  all  of  its  business  within  such  reasonable  hours  as  it 
may  fix,  and  its  customers,  or  other  parties  dealing  with  it,  have 
no  right  to  insist  on  any  business  being  transacted  except  during 
these  hours ;  but  I  do  not  think  there  is  anything  in  the  contract 
between  the  depositor  and  the  bank  which  would  require  the  bank 
to  fix  certain  definite  hours  and  transact  business  only  within 
those  hours. 


Drawer  Has  Right  to  Stop  Payment  on  Check  After  Bank  Has 
Notified  Payee  by  Telephone  or  Telegraph  that  Check 
Is  Good,  but  Before  It  Is  Paid. 

Where  a  bank  has  wired  its  correspondent  that  the  check  of  a  given 
party  for  a  given  amount  is  "O.  K.,"  but  before  payment  the  drawer  noti- 
fies the  bank  not  to  pay  the  check,  is  the  bank  authorized  to  hold  the 
amount  and  pay  the  check  in  spite  of  the  notice  to  stop  payment,  and  can 
the  drawer  of  the  check  hold  the  bank  liable  for  so  doing?  Would  bank 
be  liable  to  holder  for  refusing  to  do  so? 

I  quote  from  Michie  on  Banks  and  Banking,  p.  1101 : 

"An  ordinary,  uncertified  check  on  a  general  account  is  simply 
an  order  which  may  be  countermanded  and  payment  forbidden 
by  the  drawer  at  any  time  before  it  is  actually  paid  or  accepted 
by  the  bank  on  which  it  is  drawn.  After  acceptance  or  payment, 
however,  by  the  bank,  the  drawer's  right  of  revocation  is  lost." 

This  is  the  generally  accepted  rule.  It  is  also  generally  recog- 
nized that  a  check  can  only  be  certified  in  writing,  and  must  be 
actually  presented  to  the  bank  for  that  purpose.  I  quote  again 
from  the  same  author,  p.  1171 : 


256  PARK'S  BANKING  LAW  OF  GEORGIA. 

"A  parol  representation  by  a  bank  that  a  check  drawn  on  it  is 
'all  right'  is  not  equivalent  to  a  certification,  and  binds  the  bank 
to  nothing  more  than  that  the  statement  was  true  at  the  time  it 
was  made.  While  an  affirmative  answer  by  the  bank  to  a  general 
inquiry  whether  checks  of  a  person  named,  for  a  specified  sum, 
are  good,  is  information  that  such  person  has  on  deposit,  subject 
to  check,  money  to  that  amount,  it  does  not  constitute  a  certifica- 
tion of,  or  otherwise  create  an  obligation  on,  the  bank  to  pay 
checks  which  the  inquirer  may  then  hold." 

I  do  not  think  the  telegram  to  the  bank's  correspondent  that  the 
check  was  "O.  K."  is  equivalent  to  certification  or  that  it  ren- 
dered the  bank  liable  to  pay  the  check  when  presented.  Therefore 
the  drawer  of  the  check  had  the  right  to  stop  payment  at  any  time 
before  it  was  actually  paid,  and  if  the  check  was  paid  in  spite  of 
his  direction  not  to  pay  it,  the  bank  would  be  liable  for  such  pay- 
ment. This  is  true  even  though  the  check  actually  reached  the 
drawee  bank  through  the  mail  before  the  drawer  gave  notice  to 
stop  payment.  The  mere  reception  of  the  check  could  not  be 
treated  as  payment.  If  it  had  been  charged  to  the  drawer's  ac- 
count, or  if  the  bank  had  actually  remitted  for  it,  of  course, 
payment  could  not  be  stopped,  but  the  mere  receipt  of  the  check 
without  more  could  hardly  be  regarded  as  payment. 

Having  no  authority  to  charge  a  check  certified  in  this  manner 
to  the  drawer  until  the  check  is  actually  presented  and  paid,  the 
bank  would  not  be  liable  to  the  holder  of  the  check  unless  it  had 
made  itself  liable  by  a  direct  and  positive  promise  to  pay  the 
check,  not  on  the  theory  of  certification,  but  because  it  had  itself 
assumed  a  direct  obligation.  Whether  or  not  such  liability  exists 
would  depend  upon  the  promise  made.  Merely  stating  that  the 
check  was  "O.  K."  or  "good"  would  not  be  equivalent  to  a  prom- 
ise to  pay  the  check  at  all  events,  but  is  only  intended  to  mean  that 
the  drawer  had  suffcient  funds  on  deposit  at  the  time  stated  to 
cover  the  check  and  that  if  the  check  was  presented  in  due  course 
it  would  be  paid  out  of  the  funds  of  the  drawer  provided,  of 
course,  that  those  funds  should  remain  to  his  credit  until  the 
actual  presentation  of  the  check. 

It  will  be  seen,  however,  that  a  bank  runs  considerable  risk  in 
advising  its  correspondents  and  others  that  checks  are  good,  and 
that  they  will  be  paid.  Any  communication  of  this  character 
should  always  be  carefully  guarded  so  as  to  clearly  indicate  that 
the  bank  assumes  no  direct  responsibility,  and  that  it  does  not 
undertake  to  protect  the  check  in  the  event  the  drawer  should  stop 
payment  or  check  out  his  balance. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  257 

CHECKS. 


Drawee  Bank  Has  Generally  no  Right  to  Recover  of  Payee 
Money  Paid  on  Forged  Check. 

Can  a  bank,  which  has  paid  a  check  drawn  on  it  to  one  of  its  depostors, 
charge  it  back  to  his  account  when  the  check  is  discovered  to  have  been  a 
forgery  ? 

The  general  rule,  supported  by  the  weight  of  authority,  is  thus 
stated  in  2  Morse  on  Banks  and  Banking,  p.  80 : 

"A  bank  cannot  recover  money  paid  on  a  forgery  of  the  draw- 
er's name,  from  the  person  to  whom  it  was  paid.  The  bank  is 
bound  to  know  the  signature  of  the  drawer." 

This  rule  is  recognized  as  the  law  in  Georgia  by  both  the  Su- 
preme Court  and  the  Court  of  Appeals.  Ga.  R.  R.  &  Banking  Co. 
v.  Love  and  Good  Will  Society,  85  Ga.  293 ;  Swan  Edwards  Co. 
v.  Union  Savings  Bank,  17  Ga.  App.  572. 

Formerly  the  courts  enforced  this  rule  strictly,  and  when  a 
bank  paid  money  on  a  forged  check  or  gave  another  customer 
credit  for  a  forged  check  deposited  with  it,  the  loss  was  held  to 
be  the  loss  of  the  bank  and  it  was  not  permitted  to  recover  the 
money  from  or  charge  the  check  back  to  the  customer  deposit- 
ing it. 

There  has  been  a  tendency,  however,  in  the  later  decisions  of 
the  courts  to  relax  the  stringency  of  this  rule,  on  the  ground  that 
it  is  unreasonable  to  require  the  bank  to  know  at  all  events  the 
signature  of  its  depositor  and  to  make  the  loss  fall  on  the  bank 
regardless  of  the  circumstances.  The  conduct  of  the  party  for 
whom  the  check  was  cashed  and  his  actual  loss  are  now  con- 
sidered in  determining  the  question  of  ultimate  liability. 

"The  rule  that  a  drawee  is  persumed  to  know  his  drawer's  sig- 
nature, and  hence  cannot  recover  back  money  paid  through  a  mis- 
take of  fact  upon  a  bill  to  which  the  drawer's  signature  was 
forged,  is  not  available  in  favor  of  a  holder  who  by  his  own  negli- 
gence contributed  to  the  success  of  the  fraud  practiced,  and  whose 
conduct  had  a  tendency  to  mislead  the  drawee,  who  was  himself 
free  from  fault."  Woods  v.  Colony  Bank,  114  Ga.  683  (2). 

In  the  case  cited  a  draft,  and  not  a  check,  was  involved  but  the 
rule  seems  to  be  the  same.  The  court  cites  with  approval  a 
Massachusetts  case  where  it  was  held  that 

"The  responsibility  of  the  drawee  who  pays  a  forged  check,  for 
the  genuineness  of  the  drawer's  signature,  is  absolute  only  in 
favor  of  one  who  has  not  by  his  own  fault  or  negligence  con- 


258  PARK'S  BANKING  LAW  on  GEORGIA. 

tributed  to  the  success  of  the  fraud  or  to  mislead  the  drawee ;  and 
if  the  payee  took  the  check,  drawn  payable  to  his  order,  from  a 
stranger  or  other  third  person,  without  inquiry,  although  in  good 
faith  and  for  value,  and  gave  it  currency  and  credit  by  indorsing 
it  before  receiving  payment  of  it,  the  drawee  may  recover  back 
the  money  paid."  Bank  v.  Bangs,  106  Mass.  441. 

The  Court  of  Appeals  of  Georgia  states  the  law  as  follows : 

"A  bank  is  presumed  to  know  the  signature  of  one  of  its  de- 
positors, and,  therefore,  cannot  recover  from  a  bona  fide  holder 
for  value  money  paid  by  the  bank  upon  a  check  to  which  the  draw- 
er's signature  was  forged,  unless  it  appears  that  the  holder  by  his 
own  negligence  contributed  to  the  success  of  the  fraud  practiced, 
or  his  conduct  had  a  tendency  to  mislead  the  drawee  which  was 
itself  free  from  fault."  Swan  Edwards  Co.  v.  Union  Savings 
Bank,  17  Ga.  App.  572. 

The  question  whether  the  party  receiving  payment  of  the  check 
would  be  actually  injured  in  the  event  he  were  forced  to  make 
it  good  is  also  material.  The  rule  covering  this  phase  of  the  ques- 
tion as  well  as  the  one  above  discussed  is  thus  stated  in  2  Morse 
on  Banks  and  Banking,  p.  86 : 

"If  the  payee,  holder,  or  presenter  of  the  forged  paper  has 
himself  been  in  default,  if  he  has  himself  been  guilty  of  a  negli- 
gence prior  to  that  of  the  banker,  or  if  by  any  act  of  his  own  he  has 
at  all  contributed  to  induce  the  banker's  negligence,  then  he  may 
lose  his  right  to  cast  the  loss  upon  the  banker.  *  *  *  The  in- 
teresting question  has  now  come  to  be,  whether  or  not  the  payee 
has  done  his  full  duty,  or  if  he  has,  and  the  negligence  is  with  the 
bank  alone,  whether  the  payee  will  be  worse  off  by  correcting  the 
error  than  if  payment  had  been  refused." 

The  rule,  therefore,  as  at  present  enforced  by  the  courts  seems 
to  be  that  although  the  bank  is  bound  to  know  the  signature  of  its 
depositors,  it  is  not  liable  in  paying  a  forged  check  where  the 
holder  of  the  check  by  his  negligence  has  in  any  way  contributed 
to  the  perpetration  of  the  fraud  or  where  he  will  not  be  injured  in 
case  the  bank  is  allowed  to  recover  back  the  money  paid. 

NOTE.— The  Banking  Act,  §  188,  provides  that  no  bank  which  has  in  good 
faith  paid  a  forged  or  raised  check  and  charged  the  same  to  a  depositor's 
account  shall  be  liable  to  the  depositor  unless  the  depositor  shall  notify  the 
bank  within  sixty  days  after  his  pass  book  is  balanced  that  the  check  is  a 
forgery. 


OPINIONS  of  THE  GENERAL,  COUNSEL,.  259 

Drawee  Bank  Paying  Forged  Check  of  Customer  Can  Not 
Recover  of  Merchant  who  Accepted  the  Check  in  Due 
Course  of  Business  Though  from  Unidentified  Stranger. 

A  customer  of  the  M  Bank,  accepted  as  cash  two  checks  drawn  on  L 
Bank  and  signed  by  W.  These  checks  were  deposited  by  C  in  the  M 
Bank,  and  on  the  same  day  were  transferred  by  the  M  Bank  to  the  F 
Bank,  which  bank  undertook  to  collect  from  the  L  Bank.  On  the  fol- 
lowing day  they  were  presented  to  the  L  Bank  and  by  that  bank  charged 
to  the  account  of  W,  and  the  F  Bank  was  given  credit  for  them.  Fifteen 
days  after  the  L  Bank  had  accepted  the  checks  as  genuine  and  charged 
them  to  its  customer's  account,  the  L  Bank  notified  the  F  Bank  that  the 
checks  were  claimed  to  be  forgeries.  The  F  Bank  promptly  notified  the 
M  Bank,  and  the  M  Bank  as  promptly  notified  C.  C  takes  the  position 
that  inasmuch  as  the  bank  on  which  the  checks  were  drawn  accepted  them 
as  genuine  and  the  party  who  issued  the  checks  has  in  the  meantime  been 
lost  sight  of,  the  money  cannot  be  recovered  back  notwithstanding  its 
guarantee  of  the  endorsement  when  it  negotiated  the  checks.  C  explains 
that  the  checks  were  given  to  it  in  due  course  in  payment  for  work  done 
by  a  person  who  represented  himself  to  be  W  and  who  it  had  every  reason 
to  believe  was  W.  On  whom  should  the  loss  fall? 

The  position  of  C  seems  to  be  sound  and  he  cannot  be  re- 
quired to  make  the  checks  good.  It  follows,  of  course,  that 
neither  the  F  Bank  nor  the  M  Bank  can  be  required  to  make  good 
the  checks,  and  that  the  L  Bank  cannot  charge  these  checks  back 
to  the  account  of  the  F  Bank. 

The  rule  is  fully  discussed  in  the  preceding  opinion. 

The  L,  Bank  had  the  right  to  refuse  to  pay  these  checks  when 
they  were  presented.  Having  paid  them,  it  cannot  now  deny  the 
genuineness  of  the  signature.  C  was  not  bound  to  know  W's 
signature  or  the  identity  of  the  man  who  represented  himself  to 
be  W.  It  had  the  right  to  take  these  checks  and  present  them 
to  the  L,  Bank,  directly  or  indirectly.  When  that  bank  by  paying 
ing  the  checks  represented  to  C  that  the  signatures  were  genuine, 
C  had  no  further  interest  in  the  matter.  Certainly,  after  fifteen 
days  had  passed  and  C's  customer  had  been  entirely  lost  sight  of, 
it  would  be  an  injustice  to'  require  C  to  lose  the  amount  of  these 
checks. 

The  relaxation  of  the  rule  that  a  bank  must  know  its  depositor's 
signature  is  in  cases  where  the  party  presenting  the  checks  for 
payment  is  himself  in  some  way  a  party  to  the  forgery  or  knows 
that  the  checks  are  forged,  or  has  acted  in  bad  faith,  or  has  been 
so  grossly  negligent  that  his  conduct  has  had  a  tendency  to  mis- 
lead the  bank  on  which  the  checks  are  drawn.  Nothing  of  that 
kind  appears  in  this  case. 

A  merchant  doesn't  have  to  require  that  his  customers  be 
identified.  If  the  L  Bank  had  promptly  denounced  the  checks 
as  forgeries,  C  might  have  been  able  to  collect  his  money  out  of 


260  PARK'S  BANKING  LAW  OF  GEORGIA. 

tke  drawer.  It  seems  that  there  was  little  if  any  negligence  on 
C's  part,  but  that  there  was  negligence  on  the  part  of  the  L  Bank 
in  paying  the  forged  checks. 


Drawee  Bank  Can  Recover  Amount  Paid  on  Forged  Check 
of  Illiterate  Where  Signature  (by  mark)  Is  Witnessed 
by  Person  Cashing  Check  for  Stranger. 

At  the  request  of  a  merchant,  a  bank  telephoned  to  another  bank  in  a 
neighboring  town,  asking  whether  or  not  the  check  of  a  particular  party 
was  good.  The  bank  replied  that  it  was.  On  the  strength  of  this  informa- 
tion, the  merchant  cashed  the  check,  which  was  forwarded  in  due  course  to 
the  bank  upon  which  drawn,  and  the  forwarding  bank  credited  with  the 
amount.  Some  days  later  the  drawee  bank  in  making  settlement  with  its 
customer  is  advised  that  the  check  is  a  forgery.  The  check  was  signed 
by  the  drawer's  mark,  which  was  witnessed  by  the  merchant,  who  had  no 
personal  acquaintance  with  the  drawer.  Can  the  bank  upon  which  the 
check  is  drawn  charge  the  check  back  to  the  forwarding  bank? 

The  forwarding  bank  handled  this  check  in  the  due  course  of 
business,  and  there  were  no  suspicious  circumstances  surround- 
ing the  transaction  so  far  as  it  was  concerned,  and  it  had  no 
reason  to  suspect  that  the  check  was  not  genuine.  If  this  is  the 
case,  as  between  it  and  the  bank  upon  which  the  check  was  drawn, 
the  loss  would  have  to  fall  on  the  drawee  bank.  It -seems,  how- 
ever, that  the  merchant  did  not  exercise  proper  caution  in  cash- 
ing the  check.  He  should  not  have  accepted  the  check,  of  one 
who  could  not  sign  his  name,  without  having  the  party  posi- 
tively identified.  The  drawee  bank  was  doubtless  misled  by  the 
fact  that  the  merchant  witnessed  the  drawer's  signature,  and  it 
was  on  the  strength  of  the  fact  that  the  signature  was  so  wit- 
nessed that  the  check  was  paid.  Therefore,  as  between  the  mer- 
chant and  the  drawee  bank,  the  loss  should  properly  fall  upon 
the  merchant  rather  than  upon  the  bank.  In  a  leading  case,  it  was 
said: 

"Where  a  loss  which  must  be  borne  by  one  of  two  parties  alike 
innocent  of  the  forgery  can  be  traced  to  the  neglect  or  fault  of 
either,  it  is  reasonable  that  it  should  be  borne  by  him,  even  if 
innocent  of  any  intentional  fraud,  through  whose  means  it  has  suc- 
ceeded. To  entitle  the  holder  to  retain  money  obtained  by  a 
forgery,  he  should  be  able  to  maintain  that  the  whole  responsi- 
bility of  determining  the  validity  of  the  signature  was  placed  upon 
the  drawee,  and  that  the  vigilance  of  the  drawee  was  not  lessened 
and  that  he  was  not  lulled  into  a  false  security  by  any  disre- 
gard of  duty  on  his  own  part,  or  by  the  failure  of  any  precau- 
tions which  from  his  implied  assertion  in  presenting  the  check  as 


OPINIONS  01?  THE  GENERAL  COUNSEL.  261 

a  sufficient  voucher  the  drawee  had  a  right  to  believe  he  had 
taken."  Danvers  Bank  v.  Salem  Bank,  151  Mass.  280,  24  N.  E. 
44. 

Under  this  rule,  which  seems  to  be  generally  recognized,  the 
merchant,  not  having  exercised  proper  precaution  before  cashing 
the  check  and  having  misled  the  drawee  bank  by  witnessing  the 
signature  of  the  drawer,  should  bear  the  loss  rather  than  that 
the  bank  should  do  so. 


Bona  Fide 'Holder  of  Check  Protected. 

A  bank  cashed  a  check  drawn  by  a  responsible  person  on  a  bank  in  a 
neighboring  town.  Before  mailing  it  to  its  correspondent  for  collection, 
the  bank  was  advised  by  the  drawee  bank  that  the  bank  and  the  drawer  of 
the  check  had  been  garnished  for  all  money  due  the  payee  of  the  check. 
Was  the  drawee  justified  in  refusing  to  honor  the  check  when  it  was  sub- 
sequently presented? 

I  understand  from  the  question  that  the  bank  actually  parted 
with  the  money  called  for  by  the  check,  and  that  it  did  not  simply 
receive  it  from  the  payee  for  collection.  If  so,  the  paying  bank 
is  a  bona  fide  holder  for  value  of  the  check,  and  the  drawee  bank 
was  not  justified  in  refusing  to  pay  it. 

A  check  is  a  negotiable  instrument  like  a  note  or  bill  of  ex- 
change, and  the  holder  of  a  check  who  takes  it  bona  fide  and  for 
value  is  just  as  much  entitled  to  protection  as  is  the  bona  fide 
holder  of  a  promissory  note  or  other  negotiable  instrument.  The 
courts  are  loath  to  interfere  with  the  rights  of  bona  fide  holders 
of  any  form  of  commercial  paper.  Negotiable  instruments  play 
an  all  important  part  in  the  world  of  commerce,  and  it  is  most 
essential  to  safeguard  the  rights  of  those  who  take  them  for  value 
and  without  notice,  in  the  ordinary  course  of  business. 

The  paying  bank  is,  therefore,  entitled  to  have  the  check  paid 
by  the  drawee  bank.  If  a  bank  upon  which  a  check  is  drawn 
could  refuse  to  honor  it  under  such  circumstances,  a  bank  would 
never  be  safe  in  cashing  a  check  though  received  by  it  in  the  usual 
course  of  business. 

I  quote  from  Fourth  National  Bank  v.  Mayer,  89  Ga.  108 : 

"Where  a  regular  customer  of  a  bank  deposits  with  the  bank 
his  draft  payable  to  his  own  order  and  indorsed,  'For  deposit  to 
the  credit  of  the  drawer,  and  the  same  is  entered  to  his  credit  on 
the  books  of  the  bank  and  forwarded  by  the  bank  to  another  bank 
for  collection,  the  drawer,  by  the  course  of  dealing, -having  the 
right  to  check  against  such  deposit  and  in  fact  checking  against 


262  PARK'S  BANKING  LAW  OF  GEORGIA. 

it,  and  his  checks  being  honored,  the  title  to  the  draft  passes  to 
the  first  bank,  and  when  collected  by  the  second,  the  proceeds  are 
not  subject  to  garnishment  at  the  instance  of  a  creditor  of  the 
drawer,  such  proceeds  being  the  property  not  of  the  drawer  but 
of  the  first  bank." 

The  facts  of  this  case  are  somewhat  different  from  those 
stated  in  the  question,  but  the  principle  is  the  same.  When  a  bank 
cashes  a  check  for  the  payee,  title  to  the  check  passes  to  it,  and 
it  cannot  be  interfered  with  by  garnishment  served  upon  the 
drawer  and  the  drawee  to  hold  up  the  funds  of  the  payee. 


Drawer  of  check  payable  to  bearer  is  liable  to  bona  fide  holder 
for  value,  though  check  may  have  been  lost  or  stolen. 

A  bank  issues  its  check  on  its  New  York  correspondent.  The  payee  in- 
dorses it  in  blank  and  delivers  it  to  another  holder.  The  check  is  lost  or 
stolen  while  in  the  possession  of  this  holder.  It  is  then  indorsed  by  an- 
other person,  presumably  the  person  who  found  it,  and  in  due  course  and 
for  value  comes  into  the  hands  of  an  innocent  holder.  As  soon  as  the  loss 
of  the  check  is  discovered,  the  owner  notifies  the  bank  and  requests  it  to 
stop  payment,  which  is  done.  The  check  is  presented  to  the  drawee  in 
New  York,  and  payment  refused  under  instructions,  and  the  check  is  pro- 
tested. After  stopping  payment  the  bank  issues  a  duplicate,  which  is  paid. 
The  holder  of  the  original  check  is  now  demanding  payment  of  the  bank 
as  the  drawer  of  the  check.  Is  the  bank  liable? 

The  fact  that  the  check  in  question  is  a  cashier's  check  or  that 
the  check  is  the  check  of  a  bank  on  its  correspondent  makes  no 
difference.  The  bank  is  in  the  same  position  as  any  other  drawer 
of  a  check,  and  is  liable  to  the  same  extent  as  any  other  drawer 
would  be.  In  answer  to  the  question,  I  quote  from  a  few  of  the 
leading  authorities. 

"If  a  check  be  lost  by  the  lawful  owner  thereof,  and  subse- 
quently come  into  the  hands  of  a  bona  fide  holder  for  value  and 
without  notice,  he  will  be  entitled  to  receive  the  amount  from  the 
bankers.  If  they  refuse  to  pay  him,  by  reason  of  instructions  to 
this  effect  given  them  by  the  drawer,  the  holder  may  recover  the 
amount  from  the  drawer."  Morse  on  Banks  and  Banking,  §  395. 

"Although  the  robber  or  finder  of  a  negotiable  instrument  can 
acquire  no  title  against  the  legal  owner,  still,  if  it  be  indorsed  in 
blank,  or  payable  or  indorsed  to  bearer,  a  third  party  acquiring  it 
from  the  robber  or  finder,  bona  fide,  for  a  valuable  consideration, 
and  before  (but  not  so,  if  after)  maturity,  without  notice  of  the 
loss,  may  retain  it,  as  against  the  true  owner,  upon  whom  the  loss 
falls,  and  enforce  payment  by  any  party  liable  thereon,  upon  the 
principle  that,  whenever  one  of  two  innocent  persons  must  suffer 
by  the  act  of  a  third,  he  who  has  enabled  such  a  third  person  to 


OPINIONS  otf  THE  GENERAL  COUNSEL.  263 

occasion  the  loss  must  sustain  it."    Daniel  on  Negotiable  Instru- 
ments, §  1469. 

"A  man  may  draw  his  check  in  complete  form  and  leave  it 
upon  his  desk.  It  may  be  blown  from  the  window  and  picked  up 
on  the  street,  or  a  thief  may  enter  and  carry  it  off.  There  is  no 
actual  delivery  in  such  a  case.  But,  if  the  check  happens  to  be 
drawn  payable  to  bearer,  so  that  it  may  be  disposed  of  without 
forging  the  payee's  indorsement,  and  it  is  negotiated  to  a  holder 
in  due  course,  or  is  paid  by  the  drawee  bank  without  negligence,  a 
valid  delivery  is  conclusively  presumed  and  the  drawer  will  be 
held  liable."  Brady  on  The  Law  of  Bank  Checks,  §  26. 

"Where  the  payee  of  a  bank  check  indorses  it  in  blank  and  it  is 
lost,  he  cannot  recover  of  the  bank  for  paying  it  to  a  bona  fide 
purchaser,  though  he  had  notified  the  bank  of  its  loss."  Michie 
on  Banks  and  Banking,  §  146. 

It  will  be  seen  from  the  above  that  under  the  facts  stated,  the 
bank  would  be  liable  as  the  drawer  of  this  check,  the  check  being 
in  the  hands  of  a  bona  fide  holder  for  value  in  due  course  of  busi- 
ness, although  it  may  have  been  lost  or  even  stolen  from  an  in- 
termediate holder. 


Bank  may  Require  the  Signature  to  a  Check  of  an  Illiterate 
Depositor  to  Be  Witnessed. 

Is  there  any  law  which  requires  the  mark  of  an  illiterate  person  used 
as  a  signature  of  a  check  to  be  witnessed  by  some  party  other  than  the 
payee,  and  is  a  bank  justified  in  refusing  to  pay  a  check  and  in  protesting 
the  same  where  the  mark  is  witnessed  by  the  payee? 

Under  our  Code  "signature  or  subscription  includes  the  mark 
of  an  illiterate  or  infirm  person."  §  5,  Park's  Ann.  Code. 

There  is  no  requirement  that  such  a  signature  be  witnessed,  and 
the  Supreme  Court  has  held  that  a  signature  by  mark  is  good 
though  not  witnessed.  While  this  is  true  it  is  a  reasonable  re- 
quirement that  such  a  signature  should  be  witnessed.  I  quote 
from  Magee  on  Banks  and  Banking,  p.  310: 

"The  place  of  the  signature  is  immaterial,  provided  it  appears 
to  have  been  intended  as  a  signature.  It  may  be  written  in  pencil. 
Or  it  may  be  printed  or  stamped.  Or  it  may  be  the  drawer's 
mark.  In  which  case,  however,  when  executed  by  the  maker 
by  mark,  it  should  be  executed  in  the  presence  of  an  officer  of  the 
bank,  or  witnessed  by  a  person  who  could,  if  called  upon  by  the 
bank,  verify  the  authenticity  of  the  check." 

This  is  in  line  with  the  other  authorities  on  the  subject. 
As  a  bank  has  no  way  to  determine  whether  or  not  a  check 
signed  by  the  depostor's  mark  is  genuine  unless  it  is  witnessed  by 


264  PARK'S  BANKING  LAW  OF  GEORGIA. 

some  person  whose  signature  is  known  to  the  bank,  and  as  it  is 
responsible  to  the  depositor  in  the  event  it  pays  a  forged  check, 
the  bank  would  have  a  right  to  decline  to  pay  a  check  signed  by 
the  depositor's  mark  which  was  not  witnessed  by  a  person  whose 
signature  was  known  to  the  bank,  unless  the  genuineness  of  the 
check  was  in  some  other  way  established.  Where  payment  of  a 
check  is  refused  for  any  reason  the  indorsers  are  relieved  unless 
protest  is  made  and  notice  given  as  required  by  the  statute.  There- 
fore, where  a  bank  is  obliged  to  decline  to  pay  a  check  because  it 
is  signed  by  the  depositor's  mark,  and  there  is  nothing  from  which 
the  bank  can  determine  whether  or  not  the  check  is  genuine,  it 
would  be  proper  to  protest  the  check. 

When  an  illiterate  person  opens  an  account  the  bank  should 
agree* with  him  at  the  time  that  his  checks  must  be  witnessed  by 
some  officer  of  the  bank  or  some  other  person  with  whose  signa- 
ture the  bank  is  acquainted.  While  it  is  unusual  to  require  that 
these  checks  be  witnessed  by  someone  other  than  the  payee,  such 
a  requirement  is  not  unreasonable,  for  if  the  payee  is  the  only 
witness  to  the  genuineness  of  a  check  there  is  a  considerable 
temptation  to  forge  the  drawer's  signature,  and  the  bank  would, 
of  course,  have  the  right  to  protect  itself  against  this  risk. 

I  have  not  been  able  to  find  any  case  in  which  the  question  has 
been  decided,  or  any  discussion  of  the  question  by  any  writer  on 
the  subject  of  banks  and  banking,  but  on  principle  it  seems  to  me 
that  the  bank  would  be  justified  in  declining  to  pay  a  check  of 
an  illiterate  depositor  signed  by  his  mark,  where  there  was  no 
other  proof  of  the  genuineness  of  the  check  that  the  attestation 
of  the  payee,  particularly  where  the  bank  did  not  know  the  sig- 
nature of  this  attesting  witness. 


Where  Depositor's  Balance  Is  Insufficient  to  Pay  Check  in 
Full,  the  Safer  Rule  Is  for  the  Bank  to  Decline  to  give 
any  Information  as  to  the  State  of  the  Account  and  Re- 
fuse to  Allow  the  Holder  to  Deposit  Difference. 

Where  a  depositor  gives  a  check  which  overdraws  his  account,  can  the 
payee  deposit  to  the  credit  of  the  drawer  a  sufficient  amount  to  bring  the 
depositor's  balance  up  to  the  amount  of  the  check,  and  would  the  bank  be 
authorized  to  pay  the  check  out  of  a  deposit  made  up  in  this  way? 

The  precise  question  does  not  seem  to  have  been  decided  by  any 
of  the  courts  so  far  as  I  have  been  able  to  find.  The  nearest  ap- 


OPINIONS  OF  THE  GENERAL  COUNSEL.  265 

proach  to  it  is  a  case  decided  by  one  of  the  lower  courts  in  Phila- 
delphia, where  it  was  held : 

"Where  the  payee  of  a  bank  check  offers  to  take  a  smaller  sum 
than  the  amount  called  for,  the  bank  should  pay  to  him  whatever 
funds  the  drawer  may  have  to  his  credit  and  indorse  the  pay- 
ment on  the  check."  Bromley  v.  Commercial  National  Bank,  9 
Phila.  522. 

This  case  is  referred  to  by  most  of  the  writers  on  banks  and 
banking. 

The  general  rule  is  thus  stated  by  Michie  on  Banks  and  Bank- 
ing,  §  140  (5)  : 

"A  bank  is  under  no  obligation  to  pay  anything  on  a  check  to 
the  drawee  or  holder  when  the  drawer  has  not  sufficient  money 
on  deposit  to  his  credit  to  pay  the  check  in  full,  and  can  not  be 
held  liable  in  an  action  by  the  payee  or  holder  thereof.  A  check 
for  a  greater  amount  than  one  has  on  deposit  does  not  pass  to  the 
holder  any  title  to  the  deposit,  nor  does  it  create  a  lien  upon  or 
give  the  payee  a  right  to  the  actual  balance,  until  the  bank  has 
agreed  to  pay  it  pro  tanto." 

However,  Michie  also  says,  on  the  authority  of  Bromley  v. 
Commercial  National  Bank,  above  cited: 

"Where  the  payee  of  a  bank  check  offers  to  take  a  smaller 
sum  than  the  amount  called  for,  the  bank  should  pay  to  him  what- 
ever funds  the  drawer  may  have  to  his  credit,  and  indorse  the 
payment  on  the  check." 

Morse  on  Banks  and  Banking,  which  is  an  old  standard  au- 
thority, says: 

"If  the  bank  has  not  funds  enough  to  the  credit  of  the  drawer 
to  pay  his  check  in  full,  it  is  not  obliged  to  make  payment  in  part. 
Whether  or  not  it  would  be  justified  in  doing  so,  may  be  ques- 
tioned. There  is  no  authority  on  the  point.  Nor  would  banks 
often  try  to  exercise  such  a  right.  If  they  can  do  so,  they  are  ob- 
viously bound  to  indorse  the  amount  of  the  payment  on  the 
check,  which  would,  of  course,  still  remain  in  the  payee's  hands, 
and  which  would  otherwise  on  its  face  appear  still  to  be  good  for 
the  full  value  named  in  it,  to  the  possible  deception  and  loss  of 
the  drawer,  or  of  innocent  third  parties.  But  the  better  rule 
perhaps  would  be,  to  save  misunderstandings  and  complications, 
that,  if  a  bank  can  not  pay  in  full,  it  not  only  may  not,  but  must 
not,  pay  at  all.  The  drawer  has  not  requested  it  to  make  a  part 
payment.  He  has  demanded  that  it  do  a  certain  act ;  to  wit,  pay 
a  certain  sum  of  money  on  his  account.  If  it  will  not  do  this  act 
according  to  the  terms  of  the  authority  embodied  in  the  request,  it 
by  no  means  follows  that  it  is  authorized  to  substitute  for  it  a 
partial  performance,  or  in  fact  a  materially  different  act.  Power 


266  PARK'S  BANKING  LAW  of  GEORGIA. 

to  pay  only  a  part  of  a  sum  is  not  necessarily  implied  in  an  order, 
expressed  without  alternative,  to  pay  that  specific  sum. 

"A  device  whereby  the  checkholder  may  seek  to  obtain  pay- 
ment, where  his  check  calls  for  a  larger  amount  than  the  drawer's 
balance  at  the  time  of  presentment,  is  that  the  holder  may  himself 
pay  in,  or  cause  to  be  paid  in,  the  amount  of  the  deficiency,  and 
have  the  same  placed  to  the  drawer's  credit.  The  drawer's  ac- 
count being  thus  made  good,  the  check  might  perhaps  be  safely 
honored  by  the  bank.  But  the  bank  is  not  justified  in  informing 
the  holder  what  is  the  amount  of  the  deficiency,  or  what  the 
state  of  the  drawer's  account.  He  must  find  it  out  elsewhere  if 
he  can,  since  the  bank  can  give  such  information  only  at  its  own 
peril."  Morse  on  Banks  and  Banking,  §  446. 

Bolles,  in  his  Modern  Law  of  Banking,  takes  the  same  view  as 
Morse  does.  He  says : 

"Not  infrequently  a  depositor,  through  forgetfulness  or  other- 
wise, draws  his  check  for  a  larger  sum  than  he  has  on  deposit.  In 
such  a  case  the  bank  may  decline  to  pay  whatever  it  may  have. 
On  the  other  hand,  it  may  pay  over  the  insuffcient  amount,  credit- 
ing it  on  the  holder's  check.  No  reason  is  perceived,  if  the  holder 
is  willing  to  give  up  his  check  for  whatever  may  be  due  to  the  de- 
positor, why  the  bank  should  refuse  to  pay  it.  The  reason  usually 
given,  that  this  is  not  a  fulfillment  of  the  drawer's  order,  is  not 
satisfactory,  for  it  is  quite  as  reasonable  to  presume  that  the 
drawer  supposed  at  the  time  of  drawing  his  check  that  his  de- 
posit was  suffcient.  If  so,  is  not  the  presumption  fair  that  he 
would  be  pleased  to  have  the  bank  pay,  and  the  depositor  receive, 
the  sum  in  the  bank  ?"  Bolles  on  Modern  Law  of  Banking,  §  27. 

Zane  on  Banks  and  Banking,  p.  255,  says :  "A  bank  may  refuse 
to  pay  a  part  of  a  check,  but  may  agree  to  pay  pro  tanto,"  also 
citing  the  Bromley  case. 

It  appears  from  these  authorities  that  the  bank  is  certainly 
under  no  obligation  to  apply  toward  the  payment  of  a  check  a 
depositor's  balance  which  is  less  than  the  amount  of  the  check, 
and  it  is  doubtful  whether  it  has  the  right  to  do  so,  though  these 
authors  seem  to  think  that  it  has  the  right  but  is  not  compelled 
so  to  do.  It  has  been  held  by  one  of  the  English  courts  that  a 
bank  has  no  right  to  inform  the  holder  of  a  check  as  to  the  state 
of  a  depositor's  account.  If  the  bank  can  not  safely  tell  the 
holder  of  a  check  the  amount  of  the  depositor's  balance,  of  course, 
the  holder  could  not  know  what  amount  to  deposit  in  order  to 
make  the  check  good.  I  think  the  safer  rule  is  for  the  bank  to  de- 
cline to  pay  or  to  give  the  holder  of  the  check  any  information 
about  the  account  other  than  that  there  are  not  suffcient  funds 
to  meet  it. 


OPINIONS  of  THE  GENERAL  COUNSEL.  267 

Where  Depositor's  Balance  Is  Insufficient  to  Pay  All  Checks 
Presented  Simultaneously,  None  Should  Be  Paid. 

A  depositor  draws  a  number  of  checks  in  favor  of  different  individuals, 
which  in  the  aggregate  are  more  than  the  customer's  balance.  These 
checks  are  all  presented  at  the  same  time  to  the  bank  on  which  they  are 
drawn,  through  another  bank.  Should  the  drawee  bank  refuse  to  pay 
any  of  the  checks  or  should  it  pay  all  of  those  which  can  be  paid  out  of  the 
money  on  deposit  to  the  credit  of  the  drawer? 

The  rule  as  generally  announced  under  such  circumstances  is 
well  stated  by  Mr.  Morse,  who  is  generally  regarded  as  the  lead- 
ing authority  on  banks  and  banking. 

"The  payment  of  checks  may  be  affected  by  the  use  of  the 
clearing  house  in  one  important  particular.  Checks,  as  has  been 
seen,  must  be  paid  in  the  order  of  presentment.  But  when  the 
deputy  of  the  bank  takes  from  its  drawer  in  the  clearing  house 
all  the  checks  which  it  has  to  pay,  he  may  receive  a  considerable 
number  of  checks  of  the  same  depositor.  It  is  clear  that  there 
can  be  no  priority  among  these.  They  are  all  received  at  pre- 
cisely the  same  moment.  For  the'order  in  which  they  are  placed 
in  the  drawer  has  nothing  to  do  with  the  presentment  of  them 
to  or  receipt  of  them  by  the  bank,  indeed  is  in  nearly  all  cases 
unknown  to  the  bank.  The  bank  cannot  look  at  their  dates ;  for 
priority  of  presentment,  not  of  date,  secures  priority  of  payment. 
So,  if  the  bank  cannot  pay  all  the  checks  of  any  individual  de- 
positor then  coming  through  clearing,  it  must  pay  none  of  them. 
It  has  no  legal  power  or  right  to  select  or  choose  from  among 
them  certain  ones  which  it  will  honor,  or  certain  ones  which  it 
will  dishonor.  All  or  none  must  be  paid.  Any  other  course 
would  render  .the  bank  liable  to  the  holders  of  the  dishonored 
paper.  A  check  presented  at  the  counter  for  payment  must  be 
paid  at  once,  if  there  are  funds  enough  to  the  drawer's  credit  to 
pay  it  alone;  but  if  it  is  sent  through  clearing  it  must  take  its 
chance  that  his  funds  shall  be  suffcient  to  pay  not  only  it,  but  all 
his  other  checks  which  shall  be  sent  through  clearing  on  the  same 
day  ;  and  failing  this,  it  must  be  dishonored."  1  Morse  on  Banks 
and  Banking,  §  354. 

There  is,  however,  some  authority  for  the  proposition  that  the 
bank  is  authorized,  if  not  required,  under  the  circumstances,  to 
pay  all  the  checks  which  can  be  paid  out  of  the  depositor's  bal- 
ance. In  the  recent  work  of  Michie  on  Banks  and  Banking,  it  is 
said: 

"Where  checks  are  presented  by  different  individuals,  at  the 
same  time,  of  an  amount  greater  than  the  fund  of  the  drawer  in 
the  bank,  the  offcers  of  the  bank  are  not  bound  to  settle  the  con- 
flicting claims  of  the  holders  of  the  different  checks  to  priority  of 
payment. 

"Where  a  number  of  checks  variously  dated  are  presented  to  a 
bank  simultaneously  through  the  clearing  house  for  payment,  and 


268  PARK'S  BANKING  LAW  OF  GEORGIA. 

the  aggregate  amount  of  the  checks  is  greater  than  the  amount 
of  the  deposit,  the  bank  is  bound  to  pay  the  checks,  but  in  any 
order  that  it  may  choose,  until  the  deposit  is  exhausted,  if  there  is 
no  rule  of  the  clearing  house  or  custom  of  the  banking  community 
to  the  contrary."  Michie  on  Banks  and  Banking,  Vol.  2,  p.  1139. 

A  similar  statement  is  made  in  Brady  on  Bank  Checks,  p.  243. 
The  only  authority,  however,  for  these  statements  appears  to  be 
the  case  of  Reinisch  v.  Consolidated  National  Bank,  decided  by 
a  Superior  Court  in  Pennsylvania  and  reported  in  45  Pa.  Supr. 
Ct.  236. 

Mr.  Bolles,  in  his  Modern  Law  of  Banking,  says : 

"On  the  presentation  of  two  or  more  checks  simultaneously 
several  practices  among  banks  prevail ;  the  more  general  is  to 
send  all  the  checks  back,  a  step  that  is  likely  to  be  followed  by  a 
separate  presentation  with  the  chances  of  payment  in  favor  of 
the  nearest  bank,  unless  the  representative  of  some  other  can 
overcome  the  natural  advantage  by  running  faster  or  flying. 
Another  practice,  having  legal  sanction,  is  to  pay  the  smaller 
checks,  covered  by  the  drawer's  deposit."  Bolles'  Modern  Law  of 
Banking,  Vol.  2,  p.  612. 

The  authority  cited  in  support  of  this  statement  that  the  bank 
may  pay  the  smaller  checks  covered  by  the  drawer's  deposit  is 
the  case  of  Sherburne  v.  Rickards,  decided  by  a  Superior  Court 
in  Chicago  and  reported  in  15  Banking  Law  Journal,  p.  536. 

It  will  be  seen  from  the  above  that  the  law  on  the  question  ap- 
pears not  to  be  well  settled.  Mr.  Morse  cites  no  authority  in 
support  of  his  position,  and  the  other  authors  seem  to  rely  on 
Superior  Court  cases,  which  at  best  are  very  poor  authority.  The 
question  has  not  been  decided  in  Georgia! 

The  rule  as  laid  down  by  Mr.  Morse  is,  I  believe,  the  better 
one. 


Payment  of  Checks  When  Drawer  Has  Insufficient  Funds  to 
Cover  First  Check,  but  Sufficient  Funds  to  Cover  a  Sub- 
sequent Smaller  Check,  the  First  Check  Being  Held  by 
the  Bank  for  Collection. 

A  depositor  has  $20.00  to  his  credit  in  a  bank,  and  draws  a  check  for 
825.00,  which  the  bank  refuses  to  pay.  The  payee  asked  the  bank  to  hold 
the  check  for  collection.  Subsequently  another  check  signed  by  this  de- 
positor for  $10.00  is  presented.  Has  the  bank  the  right  to  refuse  payment 
on  the  $10.00  check  on  the  ground  that  the  $20.00  to  the  credit  of  the  de- 
positor must  be  applied  on  the  $25.00  check? 

Checks  are  payable  in  the  order  of  their  presentation.  It  seems 
to  be  the  rule,  also,  that  where  several  checks  are  presented  at 


OPINIONS  OF  THE  GENERAL  COUNSEL.  269 

once  and  the  depositor  has  not  enough  money  to  his  credit  to 
pay  them  all,  the  bank  may  refuse  to  pay  any  of  the  checks. 
It  would  seem,  however,  that  that  principle  cannot  be  made  to 
apply  in  a  case  of  this  kind.  The  $25.00  check  was  presented  for 
payment,  and  payment  was  refused.  When  the  $10.00  check  was 
subsequently  presented,  the  bank  then  had  an  order  to  pay  and 
a  fund  sufficient  to  comply  with  the  order.  Notwithstanding  the 
fact  that  it  still  held  the  $25.00  check  for  the  purpose  of  collec- 
tion, it  was  bound  to  pay  the  $10.00  check.  After  the  refusal 
to  pay  the  $25.00  check,  the  bank  could  not  hold  the  balance  to 
pay  it  thereafter,  but  was  bound  to  honor  other  checks  on  the 
account  to  the  extent  of  the  depositor's  balance. 


The  Mere  Identification  of  a  Stranger  Will  Not  Make  One 
Liable  if  Check  Cashed  for  Him  Proves  Worthless. 

A  customer  identifies  a  stranger,  who  cashed  a  check  upon  another 
bank.  This  check  afterwards  is  returned  with  the  notation  "no  ac- 
count." The  check  having  been  cashed  on  the  strength  of  the  identification, 
is  the  party  identifying  the  stranger  liable  for  the  amount  of  the  check? 

Under  the  case  as  stated,  I  do  not  see  that  there  would  be  any 
liability.  This  assumes,  of  course,  that  the  customer  acted  in 
good  faith  and  simply  identified  the  stranger  as  being  the  person 
whom  he  represented  himself  to  be,  and  did  not  make  any  repre- 
sentation as  to  the  check  or  the  financial  standing  of  the  drawer 
of  the  check.  One  does  not  make  himself  liable  by  simply  in- 
troducing a  third  party.  Of  course,  if  he  acts  in  bad  faith  or 
introduces  a  party  as  some  one  other  than  he  really  is  or  makes 
any  false  statement  as  to  the  person  whom  he  introduces,  he  might 
be  liable  in  an  action  for  deceit.  If  he  was  concerned  in  getting 
the  money  on  the  worthless  check,  he  might  be  liable  criminally 
for  cheating  and  swindling,  but  the  mere  identification  of  a 
stranger  would  not  make  the  party  identifying  liable. 


Check  Is  Revoked  by  Death. 

Should  a  bank  refuse  payment  of  a  check  issued  by  a  person  who  died 
before  presentation  of  the  check  for  payment? 

The  rule,  in  the  absence  of  statute,  is  thus  stated  in  Michie  on 
Banks  and  Banking,  p.  1098 : 

"The  death  of  the  drawer  operates  as  a  revocation  of  a  check, 
so  that  if  the  bank  pays  it  after  notice  of  that  fact,  it  does  so'  at 


270  PARK'S  BANKING  LAW  OF  GEORGIA. 

its  peril.    A  bank  paying  a  check  with  notice  of  the  drawer's  death 
is  liable  to  his  estate." 

NOTE. — Section  184  of  the  Banking  Act  of  1919  provides :  "The  death  or 
bankruptcy  of  a  depositor  unknown  to  the  bank  shall  not  revoke  a  check 
given  by  him,  and  a  bank  shall  be  authorized  to  pay  through  regular  chan- 
nels a  check  regularly  drawn  upon  it  by  a  depositor  therein,  notwithstand- 
ing the  death  or  bankruptcy  of  such  depositor  unknown  to  the  bank  at  the 
time  of  such  payment." 


Death  of  Payee  After  Negotiation  Does  Not  Revoke  a  Check. 

Is  a  bank  authorized  to  pay  a  cashier's  check  where  after  indorsement 
the  payee  has  died?  In  other  words,  does  the  death  of  the  payee  of  the 
check  after  its  indorsement  cancel  the  indorsement  or  affect  in  any  way 
the  negotiability  of  the  check? 

The  question  has  not  been  decided,  I  think,  in  Georgia,  but  the 
general  rule  is  well  stated  by  the  Supreme  Court  of  Michigan,  in 
the  case  of  Brennan  v.  Merchant  and  Manufacturers  Bank,  62 
Mich.  343,  28  N.  W.  881,  in  which  the  court  says : 

"The  death  of  a  payee  or  indorser  after  a  check  has  been  ne- 
gotiated cannot  affect  its  negotiability  further  or  prevent  the 
drawee  from  safely  paying  it." 

This  case  is  frequently  referred  to  in  the  textbooks,  and  seems 
to  be  recognized  as  authority.  I  am  of  the  opinion  that  the  bank 
would  be  authorized  to  pay  the  check  on  the  indorsement  of  the 
payee  although  the  payee  may  have  died  since  he  indorsed  and 
negotiated  it.  Of  course,  if  the  check  had  not  been  negotiated,  it 
could  only  be  paid  to  the  duly  authorized  representative  of  the 
payee,  that  is,  to  his  executor  or  administrator. 


Payment  of   Check  by  Drawee   Bank  Is   Final  as  Against 
"Insufficient  Funds." 

A  check  drawn  on  the  bank  of  A  was  cashed  by  the  bank  of  B,  which 
bank  sent  it  to  the  bank  of  C  for  collection.  The  bank  of  C  sent  it  to  the 
bank  of  A,  along  with  a  number  of  other  items.  The  check  was  stamped 
paid,  and  remitted  by  the  bank  of  A  to  the  bank  of  C.  On  the  same  day 
the  bank  of  A  discovered  that  the  account  of  the  depositor  was  overdrawn, 
and  thereupon  notified  the  bank  of  C,  returning  the  check  and  asking  that 
bank  to  give  it  credit  for  the  amount  paid  through  error,  which  was  done. 
Ine  check  was  returned  in  due  course  to  the  bank  of  B.  Is  the  bank  of 
A  liable  for  the  amount  of  the  check  under  the  circumstances? 

The  general  rule  is  that  a  bank  is  bound  to  know  the  stale  of 
the  account  of  its  customers,  and  that  where  it  pays  a  check  of 
one  of  its  depositors  it  cannot  claim  that  the  payment  was  made 


OPINIONS  OF  THE  GENERAL  COUNSEL.  271 

by  mistake  where  the  account  is  ovedrawn  or  the  depositor  has 
insufficient  funds  to  cover  the  check.  The  payment  is  in  such 
cases  due  to  the  bank's  own  negligence  in  failing  to  ascertain  the 
condition  of  the  account,  and,  therefore,  the  bank  cannot  plead  in 
defense  that  the  check  was  paid  by  mistake.  The  rule  is  thus 
stated  by  Michie  in  his  work  on  Banks  and  Banking: 

"In  the  absence  of  a  fraud  on  the  part  of  the  holder,  the  pay- 
ment of  a  check  by  a  bank  is  regarded  as  a  finality,  and  the  fact 
that  the  drawer  has  not  funds  on  deposit  will  not  give  the  bank 
any  remedy  against  the  holder." 

"A  mistake  in  regard  to  the  amount  of  a  customer's  deposit  is 
not  such  a  mistake  of  fact  as  entitles  a  bank  paying  a  check  to 
recover  back  the  amount  from  the  payee.  Such  transaction  is  not 
a  mistake  of  fact  in  a  legal  sense,  only  laches.  Banks  are  sup- 
posed to  be  informed  of  a  depositor's  financial  standing,  and  to 
know  the  condition  of  his  account  with  them  at  the  time  of 
presentation  of  checks  for  payment.  They  are  required,  and  for 
their  own  safety  are  compelled,  to  know  at  all  times  the  balance 
to  the  credit  of  each  individual  customer,  and  they  accept  and 
pay  checks  at  their  own  risk  and  peril.  If  from  negligence  or 
inattention  to  their  own  affairs  banks  improvidently  pay  when  the 
account  of  a  customer  is  not  in  a  condition  to  warrant  it,  and  if 
by  mistake  a  check  is  paid  when  the  drawer  has  no  funds,  the 
bank  must  look  to  the  customer  for  rectification,  not  to  the  party 
to  whom  the  check  was  paid.  Michie  on  Banks  and  Banking,  pp. 
1145-1146. 

And  it  has  also  been  held : 

"Where  a  check  was  offered  and  received  by  the  drawee  bank 
as  a  deposit,  credited  to  the  depositor's  account,  and  charged  to 
the  account  of  the  drawer,  the  transaction  constituted  complete 
payment  of  the  check  and  could  not  be  rescinded  except  for  fraud 
or  mutual  mistake."  American  National  Bank  of  Nashville, 
Tenn.,  v.  Miller,  185  Fed.  339. 

Under  these  authorities,  the  Bank  of  B  can  recover  the  amount 
either  from  the  Bank  of  C  or  from  the  Bank  of  A.  The  Bank  of 
A  paid  the  check  to  an  agent  of  the  holder  which  was  the  same  in 
effect  as  paying  it  to  the  holder.  Under  the  law,  this  payment  was 
final  and  irrevocable,  and  the  bank  cannot  defend  against  its 
liability  on  the  ground  of  mistake. 

Nor  does  it  make  any  difference  that  the  Bank  of  A  got  the 
money  back  before  it  actually  reached  the  Bank  of  B.  The  Bank 
of  C  was  the  agent  of  the  Bank  of  B,  and  payment  to  an  agent  is 
payment  to  the  principal.  Furthermore,  the  Bank  of  C  was  an 
agent  of  the  Bank  of  B  to  collect  this  check  and  remit  the  pro- 
ceeds, and  had  no  authority  to  do  anything  else.  It  was  acting 


272  PARK'S  BANKING  LAW  OF  GEORGIA. 

outside  of  the  scope  of  its  authority  in  giving  the  Bank  of  A  credit 
for  the  check,  and  the  Bank  of  B  would  not  be  bound  by  that  act. 


Bank  Given  Credit  to  Depositor  for  Checks  Drawn  on  Itself 
Can  Not  Charge  Back  for  Insufficient  Funds  in  Absence 
of  Contract  or  Well  Known  Custom. 

Can  a  bank  receive  on  deposit  checks  on  other  banks  and  on  itself,  sub- 
ject to  be  charged  back  and  returned  to  the  depositor  in  case  they  are  not 
paid  or  in  case  there  are  not  sufficient  funds  to  cover  the  check  when  it 
happens  to  be  upon  the  bank  itself? 

Where  a  bank  receives  checks  on  deposit  drawn  on  itself 
by  another  depositor,  the.  checks  are  treated  as  paid  as  soon  as 
credit  is  given  to  the  depositor. 

The  law  on  the  subject  is  thus  stated  in  Brady  on  The  Law  of 
Bank  Checks,  pp.  269  to  271 : 

''In  many  instances  it  seems  to  be  the  practice  of  banks,  when 
one  depositor  offers  for  deposit  a  check  drawn  on  the  same  bank 
by  another  depositor,  to  credit  the  amount  of  the  check  in  the 
depositing  customer's  pass  book,  and  ascertain  afterwards  whether 
or  not  the  check  is  drawn  against  sufficient  funds.  In  cases  of 
this  kind  it  is  held  by  the  weight  of  authority  that,  where  the 
deposit  is  made  in  good  faith,  and  credit  is  duly  given,  the  bank 
cannot  afterwards  revoke  the  credit,  upon  discovering  the  check 
to  be  an  overdraft.  These  decisions  take  the  view  that  there  is 
no  difference,  in  such  a  case,  between  requesting  payment  of  the 
check  in  money  and  requesting  payment  by  a  transfer  to  the 
credit  of  the  holder.  In  either  event  the  bank  has  the  option  to 
receive  or  reject  the  check  upon  presentment,  or  to  receive  it  upon 
such  conditions  as  may  be  agreed  upon.  If  it  pays  the  check  in 
cash  to  a  bona  fide  holder,  the  transaction  is  closed  so  far  as  the 
holder  is  concerned ;  the  bank  cannot  recover  the  money  back 
from  him.  And  the  same  is  true  if  it  credits  his  account  with  the 
amount  of  the  check;  there  is  a  final  payment  which  cannot  be 
revoked.  The  holder,  however,  must  act  in  good  faith  in  order  to 
be  entitled  to  retain  the  benefit  which  the  law  accords  him  upon 
depositing  a  check  to  his  credit  in  the  drawee  bank.  Thus,  it  has 
been  held  that,  where  the  holder  of  a  check  deposited  it  in  the 
drawee  bank,  knowing  that  the  drawer  had  no  funds  there  to  meet 
it,  the  crediting  of  the  check  to  the  holder  did  not  constitute  a 
payment  of  the  check  and  the  depositor  could  not  recover  the 
amount  from  the  bank." 

The  bank,  however,  could  make  a  contract  with  a  depositor  that 
checks  were  to  be  returned  if  it  was.  subsequently  ascertained  that 
the  drawers  did  not  have  suffcient  funds  on  deposit  to  cover  the 


OPINIONS  OF  THE  GENERAL  COUNSEL.  273 

checks.  And  if  it  were  the  custom  of  the  bank  to  return  such 
checks  and  the  depositor  knew  of  such  custom,  he  would  be  bound 
by  it,  and  the  bank  would  in  that  event  be  authorized  to  return 
such  checks.  As  was  said  by  the  Court  of  Appeals  of  Missouri : 

"No  one  will  contend  for  a  moment  that  it  is  not  within  the 
province  of  the  depositor  presenting  the  check  and  the  bank  on 
which  the  check  is  drawn  to  expressly  agree  that  the  payment 
shall  be  deferred  for  a  reasonable  time  until  the  bank  may  ascer- 
tain whether  or  not  there  are  suffcient  funds  of  the  drawer  of  the 
check  in  its  hands  to  pay  it.  Such  an  agreement  instead  of 
operating  an  infringement  of  the  established  rule  of  law 
*  *  amounts  to  no  more  than  a  reasonable  modification  of 
its  application  in  the  interests  of  justice.  If  it  were  competent  for 
the  parties  to  thus  expressly  agree  with  respect  to  the  matter, 
it  would  seem  to  be  competent,  too,  for  them  to  tacitly  do  so 
under  the  established  custom,  well  known  to  both,  which  obtained 
in  good  faith  throughout  an  extended  course  of  dealing."  Pollack 
v.  National  Bank  of  Commerce,  151  S.  W.  774. 

An  appropriate  statement  on  deposit  tickets  and  in  pass  books 
would  probably  be  held  to  constitute  a  contract  which  would  re- 
lieve the  bank  from  liability. 


Bank  Is  Not  Required  to  Pay  Check  Stamped  "Not  Payable 
Through  (named)  Bank"  When  Presented  by  that  Bank. 

Can  a  bank  refuse  to  pay  checks  stamped  "not  payable  through  a  named 
bank"  when  presented  through  said  bank? 

The  precise  question  has  not  been  decided  by  our  courts.  The 
nearest  case  in  point  is  that  of  Farmers  Bank  of  Nashville  v. 
Johnson,  King  &  Co.,  134  Ga.  486.  In  that  case  it  was  decided, 
where  checks  drawn  by  Johnson,  King  &  Co.,  of  Macon,  on  the 
Farmers  Bank  of  Nashville,  had  stamped  on  them  "Payable 
through  the  Citizens  Bank  of  Valdosta,"  that  the  Farmers  Bank 
had  the  right  to  refuse  to  pay  the  checks  when  presented  by  an- 
other bank  not  coming  through  the  Citizens  Bank  of  Valdosta. 

The  court  says  that  the  drawer  of  a  check  has  a  right  to  direct 
the  channel  through  which  it  shall  be  presented  for  payment,  and 
that  the  payee  of  the  check  is  bound  to  respect  this  direction.  He 
can  refuse  to  take  the  check  at  all  on  account  of  its  direction,  but 
if  he  takes  it  he  must  present  it  through  the  channels  directed. 

While  the  courts  have  held  that  it  is  competent  to  direct  through 
what  particular  channel  a  check  must  be  presented,  they  have 
18 


274  PARK'S  BANKING  LAW  OF  GEORGIA. 

not  decided  whether  it  would  be  proper  to  forbid  the  holder  of  a 
check  from  presenting  it  through  some  named  bank  or  other 
institution.  In  principle  this  would  seem  to  be  covered  by  the 
decision,  and  if  a  customer  should  stamp  on  his  checks  "Not  pay- 
able through  a  named  bank,"  a  bank  would  be  authorized  to  de- 
cline payment  if  the  check  should  be  presented  through  the  bank 
named. 


Recovery  by  Bank  of  Payment  Made  on  Raised  Check. 

Where  a  bank  cashed  a  raised  check  and  charged  it  to  the  customer's 
account,  what  steps  can  be  taken  to  recover  the  customer's  money? 

The  person  who  raises  or  otherwise  alters  a  check,  or  who 
knowingly  passes  an  altered  check,  is  guilty  of  a  felony.  If  such 
person  can  be  located,  he  could  be  prosecuted.  The  bank 
could  also  recover  the  amount  in  a  suit  against  the  person  to 
whom  the  money  was  paid.  The  diffculty  in  such  cases  usually 
is  that  the  person  who  would  alter  a  check  is  not  responsible 
financially. 

As  between  the  bank  and  the  customer,  there  might  be  a  very 
nice  question  as  to  who  should  lose  the  money.  As  to  this,  see 
next  opinion. 


Drawer  of  Raised  Check  Must  Stand  Loss  Where  His  Neg- 
ligence in  Preparing  Check  Occasioned  the  Fraud. 

If  a  drawer  of  a  check  writes  it  with  pen  and  ink,  and  the  check  is  suc- 
cessfully raised,  is  the  drawer,  and  not  the  bank  which  pays  the  check, 
liable?  How  far  is  the  drawer  liable  for  failing  to  make  his  check  proof 
against  raising? 

There  is  no  rule  of  law  which  makes  the  drawer  of  a  check 
written  with  pen  and  ink  absolutely  liable  where  it  has  been 
raised,  simply  because  it  was  written  with  pen  and  ink.  The 
rule  is  if  the  drawer  of  a  check  has  been  so  negligent  in  drawing 
it  as  that  it  can  be  easily  raised,  he  rather  than  the  bank  will  be 
held  liable.  The  rule  is  thus  stated  in  Michie  on  Banks  and 
Banking,  pp.  1221  and  1222 : 

"Although,  as  has  been  seen,  banks  are  held  to  a  strict  lia- 
bility in  the  payment  of  forged  checks,  yet  where  the  drawer  of 
a  check  has  been  guilty  of  negligence  facilitating  the  forgery  or 
alteration  or  influencing  the  bank  in  the  payment  of  such  forged 
or  altered  paper,  the  bank  is  ordinarily  relieved  from  its  liability. 
A  check  may  be  so  carelessly  executed  by  the  depositor  as  to 


OPINIONS  OF  THE  GENERAL  COUNSEL.  275 

invite  or  give  opportunity  for  forgery,  and  make  him  liable  for 
a  loss  ensuing  and  excuse  the  bank.  Thus,  where  the  drawer  of 
a  check  has  prepared  his  check  so  negligently  that  it  can  be  easily 
altered  without  suspicion,  and  alterations  are  afterwards  made, 
the  bank  can  not  be  held  liable  for  paying  the  check  so  altered." 

Another  good  statement  of  the  rule  is  found  in  the  case  of  Crit- 
ten  v.  Chemical  National  Bank,  171  N.  Y.  219,  57  L.  R.  A.  529, 
decided  by  the  Court  of  Appeals  of  New  York.  In  this  opinion 
the  court  says : 

"To  relieve  itself  from  liability  to  make  good  the  amounts 
which  it  has  paid  on  raised  checks,  a  bank  must  affrmatively  es- 
tablish negligence  on  the  part  of  the  drawer  which  facilitated  the 
commission  of  the  fraud. 

"The  drawer  of  a  check  is  not  bound  to  prepare  it  so  that  no 
one  else  can  successfully  tamper  with  it,  to  charge  the  bank  with 
the  loss  in  case  it  pays  it  after  its  amount  has  been  fraudulently 
raised. 

"Whether  or  not  the  drawer  of  a  check  was  negligent  in  sign- 
ing it  in  the  condition  in  which  it  was  prepared  is  a  question  of 
fact  to  be  determined  largely  by  an  inspection  of  the  check  itself." 

In  the  case  of  Espy  v.  First  National  Bank,  18  Wall.  604,  21 
L.  Ed.  947,  the  Supreme  Court  of  the  United  States  says : 

"Where  money  is  paid  on  a  raised  check  by  mistake,  neither 
party  being  in  fault,  the  general  rule  is,  that  it  may  be  recovered 
back  as  paid  without  consideration. 

"But  if  either  party  has  been  guilty  of  negligence  or  careless- 
ness, by  which  the  other  has  been  injured,  the  negligent  party 
must  bear  the  loss." 

It  will  be  seen  from  these  quotations  that  it  is  a  question  of 
negligence  whether  the  drawer  is  liable  in  case  of  the  payment 
of  a  raised  check.  Generally,  it  would  not  be  a  question  of  law, 
but  in  each  case  it  would  be  a  question  of  fact  for  determination 
by  the  jury  as  to  whether  the  drawer  was  negligent. 

NOTE. — Under  §  188  of  the  Banking  Act  of  1919,  a  depositor  is  required 
to  notify  the  bank  of  the  forgery  .or  raising  within  sixty  days  after  the 
voucher  has  been  returned  to  him  or  within  sixty  days  after  notice  has 
been  given  him  to  have  his  pass  book  balanced  and  call  for  his  vouchers. 


Drawer  of  check  written  in  pencil  and  fraudulently  altered, 
which  is  paid  by  bank  in  good  faith,  must  stand  the  loss. 

K.  and  M.  draw  a  check  on  Bank  of  A.,  the  check  being  written  with  an 
ordinary  lead  pencil.  The  check  is  delivered  to  J.,  an  irresponsible  negro, 
to  be  delivered  to  the  payee.  J.  erases  the  name  of  the  payee,  fills  in  his 
own  name,  indorses  the  check,  and  cashes  it  at  F.  Bank.  F.  Bank,  in  due 
course,  collects  the  amount  from  Bank  of  A.  Can  Bank  of  A.  recover  the 


276  PARK'S  BANKING  LAW  OF  GEORGIA. 

amount  from  F.  Bank,  and,  if  so,  can  F.  Bank  recover  from  K.  and  M. 
because  of  their  drawing  the  check  in  such  way  as  that  it  could  be  readily 
altered  without  detection  and  because  of  the  delivery  of  such  check  to  an 
irresponsible  person? 

The  rule  is  well  settled  that  "a  bank  which  pays  to  any  person 
the  amount  of  a  check  fraudulently  altered  after  signature  may 
recover  back  from  such  person  the  amount  so  paid  by  it."  Morse 
on  Banks  and  Banking,  §  479. 

"A  bank  is  not  bound  to  know  the  signature  of  an  indorser,  and 
besides  the  holder  of  the  check,  whether  he  indorses  it  or  not, 
warrants  the  genuineness  of  all  prior  indorsements.  Therefore, 
if  the  bank  pay  a  check  upon  which  the  name  of  a  prior  indorser 
is  forged,  it  may  recover  back  the  amount  from  the  party  to 
whom  it  was  paid  or  from  any  party  who  indorsed  it  subsequent 
to  the  forgery."  Daniels  on  Negotiable  Instruments,  §  1663. 

"Where  a  bank  in  good  faith  and  without  negligence  pays,  even 
to  an  innocent  holder,  a  check  drawn  upon  it  which  has  been 
fraudulently  and  materially  altered,  it  may  recover  from  such 
holder  the  amount  paid,  under  the  general  rule  that  money  paid 
under  a  mistake  of  fact  may  be  recovered  back."  Brady  on  Bank 
Checks,  §  124. 

Under  these  authorities,  I  am  of  the  opinion  that  the  Bank  of 
A.  may  recover  the  amount  paid  on  this  check  from  the  F.  Bank. 

The  general  rule  is  that  a  bank  paying  a  forged  or  altered 
check  can  not  recover  the  amount  so  paid  from  the  drawer,  but 
where  the  drawer  by  his  own  negligence  or  carelessness  has  in 
any  way  contributed  to  the  fraud  which  has  been  perpetrated, 
the  bank  can  recover,  upon  the  theory  that  where  one  of  two  inno- 
cent persons  must  suffer  by  the  wrong  of  a  third  person,  he  must 
stand  the  loss  who  put  it  in  the  power  of  the  third  person  to 
commit  the  wrong. 

"Although  banks  are  held  to  a  strict  liability  in  the  pay- 
ment of  forged  checks,  yet  where  the  drawer  of  a  check  has 
been  guilty  of  negligence,  facilitating  the  forgery  or  altera- 
tion or  influencing  the  bank  in  the  payment  of  such  forged  or 
altered  paper,  the  bank  is  ordinarily  relieved  from  its  liability.  A 
check  may  be  so  carelessly  executed  by  the  depositor  as  to  invite 
or  give  opportunity  for  forgery  and  make  him  liable  for  loss  en- 
suing and  excuse  the  bank.  Thus,  where  the  drawer  of  a  check 
has  prepared  his  check  so  negligently  that  it  can  be  easily  altered 
without  suspicion,  and  alterations  are  afterwards  made,  the  bank 
can  not  be  held  liable  for  paying  the  check  so  altered."  Michie 
on  Banks  and  Banking,  page  1221. 


OPINIONS  of  THE  GENERAL  COUNSEL.  277 

"When  the  drawer  has  drawn  his  check  in  such  a  careless  or 
incomplete  manner  that  a  material  alteration  may  be  readily  ac- 
complished without  leaving  a  perceptible  mark  or  giving  the  in- 
strument a  suspicious  appearance,  he,  himself,  prepares  the  way 
for  fraud,  and  then  if  it  is  committed  he,  and  not  the  bank, 
should  suffer."  Daniel  on  Negotiable  Instruments,  §  1659. 

The  question,  whether  the  depositor  or  the  bank  paying  forged 
or  altered  checks  was  negligent,  is  usually  a  question  of  fact  to 
be  determined  from  the  circumstances  of  each  particular  case. 
A  check  or  other  negotiable  instrument  may  be  written  or  signed 
with  a  pencil,  and  an  instrument  so  written  is  valid.  But  as  a 
check  written  in  pencil  can  be  easily  altered,  and  such  alterations 
can  not  be  readily  detected  even  by  a  careful  observer,  it  would 
seem  under  the  authorities  above  quoted,  that  the  drawer  of  the 
check  would  be  liable  to  a  bank  which  innocently  and  in  good  faith 
cashed  the  check,  believing  it  to  be  genuine  and  unaltered.  Of 
course,  if  there  was  anything  suspicious  about  the  appearance  of 
the  check  or  the  circumstances  under  which  it  was  cashed,  the 
bank  ought  not  to  have  cashed  it,  and  if  it  did  so,  could  not  hold 
the  drawer  of  the  check.  But  if  the  alteration  was  in  such  way 
that  the  bank  in  exercising  proper  care  did  not  detect  it  and 
cashed  the  check  in  due  course  of  business,  the  drawer  of  the 
check,  who  put  it  in  the  power  of  the  forger  to  alter  the  check, 
should  stand  the  loss  rather  than  the  bank.  It  has  been  held,  too, 
that  where  the  drawer  of  a  check  turns  it  over  to  an  irresponsible 
person  who  might  be  suspected  of  altering  it,  and  such  alteration 
is,  in  fact,  made,  that  this,  itself,  is  such  negligence  on  the-  part 
of  the  drawer  as  to  make  him  liable  rather  than  the  bank  which 
innocently  cashes  the  check. 


Drawer  of  Check  Is  Liable  to  Holder  Where  Payment  Is 
Refused  for  Insufficient  Funds. 

Is  the  drawer  of  a  check  liable  where  payment  is  refused  by  the  drawee 
bank,  for  want  of  sufficient  funds?  Would  the  bank  cashing  the  check  be 
justified  in  garnishing  the  drawer's  salary  or  his  account  with  another 
bank? 

A  check  is  a  bill  of  exchange  drawn  on  a  bank.  The  drawer  of 
a  bill  of  exchange  is  liable  where  the  drawee  refuses  to  accept 
or  to  pay,  and  the  same  rule  holds  with  regard  to  the  drawer  of 
a  check.  I  quote  from  Tiedeman  on  Commercial  Paper,  §  455: 


278  PARK'S  BANKING  LAW  OF  GEORGIA. 

"A  check  is  no  evidence  of  the  liability  of  the  drawer  until  it 
is  shown  that  it  has  been  presented  for  payment  and  dishonored. 
But  when  this  is  shown  the  drawer  may  be  held  liable  on  the 
check  without  direct  proof  of  consideration.  The  law  presumes 
that  the  check  was  given  in  satisfaction  of  some  debt  due  by  the 
drawer." 

The  law  reads  into  a  check  substantially  these  words:  There 
is  in  the  hands  of  the  bank  on  which  this  check  is  drawn  the 
amount  of  money  called  for  by  the  check  belonging  to  me,  which 
amount  the  bank  will  pay  to  you,  or  to  any  one  you  order  the 
bank  to  pay  it  to,  upon  presentation  of  this  paper.  If  the  bank 
does  not  so  pay  to  you  or  to  any  one  to  whom  you  indorse  the 
check,  I  will  pay  the  amount. 

It  will  be  understood,  of  course,  that  a  check  must  be  pre- 
sented promptly  to  the  bank  on  which  it  is  drawn;  otherwise, 
under  some  circumstances,  the  drawer  is  relieved  of  liability. 
If  the  check  was  presented  promptly,  and  if  the  drawer  refused 
to  pay  the  same,  the  bank  would  be  justified  in  bringing  suit  on 
the  check  and  garnishing  any  funds  which  might  be  due  to  the 
drawer. 


Section  226,  Banking  Act  of  1919,  making  it  a  misdemeanor  to 
draw  a  check  on  a  bank  where  drawer  has  no  funds,  ap- 
plies to  national  banks. 

Does  §  34,  Article  20,  of  the  Georgia  Banking  Law  (§  226),  making  it  a 
misdemeanor  to  draw  or  utter  a  check  upon  a  bank  or  other  depository, 
knowing  at  the  time  that  the  drawer  of  such  check  had  not  sufficient  funds 
for  the  payment  thereof,  apply  to  national  banks? 

The  section  was  intended  to  apply  to  all  banks,  and  the  use  of 
the  words  "or  other  depository"  would  clearly  cover  national 
banks  even  if  the  words  "any  bank"  should  be  construed  as  ap- 
plying only  to  banks  organized  and  operating  under  the  act.  The 
section  supersedes  the  Act  of  1914  (Park's  Penal  Code,  §  718-d) 
on  the  same  subject. 


Bank  Cannot  Pay  or  Certify  a  Post-dated  Check  in  Advance 
of  the  Date  it  Bears. 

Can  a  demand  for  payment  be  made  on  a  post-dated  certified  check 
before  the  date  which  the  check  bears? 

Payment  on  such  a  check  cannot  be  demanded  prior  to  the  date 
on  the  face  of  the  check.     A  bank  cannot  even  certify  a  post- 


OPINIONS  OF  THE  GENERAL  COUNSEL.  279 

dated  check,  and  a  post-dated  certified  check  stands  on  exactly  the 
same  footing  as  any  other  post-dated  check.  I  quote  from  the 
decision  of  the  Court  of  Appeals  in  Smith  v.  Maddox-Rucker 
Banking  Company,  8  Ga.  App.  289: 

"A  post-dated  check  (i.  e.,  a  check  dated  at  a  time  in  future) 
is  not  subject  to  payment  or  acceptance  until  the  time  of  its  date 
arrives.  If  it  be  presented  at  a  time  in  advance  of  its  date, 
the  drawee,  even  if  he  has  funds  on  hand  suffcient  to  pay  it,  can- 
not pay  it,  or  retain  the  funds  to  pay,  as  against  other  checks  or 
drafts  presented  and  payable  prior  to  its  date.  The  drawer  of  a 
post-dated  check  does  not  undertake  to  have  the  funds  in  the 
drawee's  hands  to  meet  it  before  the  time  it  bears  date  arrives." 


Right  of  Bank  to  Recover  Money  Paid  on  Post-dated  Check. 

If  a  bank  should  pay  a  post-dated  check  by  inadvertence,  could  it  recover 
the  amount  paid  from  the  party  for  whom  it  was  cashed? 

I  have  been  unable  to  find  any  decision  on  the  question.  The 
rule  as  stated  by  the  text  writers  is  that  the  payment  of  a  post- 
dated check  before  the  date  which  it  bears  is  entirely  at  the  risk 
of  the  bank.  It  is,  of  course,  well  settled  that  the  check  cannot  be 
charged  to  the  account  of  the  drawer,  and  that  no  recourse  can 
be  had  on  him  for  the  amount. 

Morse  says  that  the  bank's  "only  source  of  restitution  is  from 
the  depositor."  Morse  on  Banks  and  Banking,  5th  Ed.,  Vol.  I, 
p.  699. 

"If  a  bank  pays  a  post-dated  check  before  the  day  of  its  ma- 
turity, it  does  so  entirely  at  its  own  risk."  Magee  on  Banks  and 
Banking,  2d  Ed.,  p.  328. 

It  is  true  that  money  paid  by  mistake  may  ordinarily  be  re- 
covered from  the  payee.  Quoting  again  from  Morse: 

"When  a  bank  honors  a  draft  by  mistake  of  fact,  the  money 
may  be  recovered.'  Morse  on  Banks  and  Banking,  Vol.  2,  p.  55. 

But  while  this  is  true,  where  the  bank  is  negligent  in  making 
the  payment,  it  can  not  ordinarily  claim  that  the  payment  was  by 
mistake.  Quoting  from  Michie  on  Banks  and  Banking,  p.  1145, 
in  regard  to  a  mistake  as  to  the  amount  of  customer's  deposit : 

"A  mistake  in  regard  to  the  amount  of  a  customer's  deposit  is 
not  such  a  mistake  of  fact  as  entitles  a  bank  paying  a  check  to 
recover  back  the  amount  from  the  payee.  Such  transaction  is  not 
a  mistake  of  fact  in  a  legal  sense,  only  laches.  Banks  are  sup- 
posed to  be  informed  of  a  depositor's  financial  standing,  and  to 
know  the  condition  of  his  account  with  them  at  the  time  of 
presentation  of  checks  for  payment.  They  are  required,  and  for 
their  own  safety  are  compelled,  to  know  at  all  times  the  balance 


280  PARK'S  BANKING  LAW  OF  GEORGIA. 

to  the  credit  of  each  individual  customer,  and  they  accept  and 
pay  checks  at  their  own  risk  and  peril.  If  from  negligence  or 
inattention  to"  their  own  affairs  banks  improvidently  pay  when  the 
account  of  a  customer  is  not  in  a  condition  to  warrant  it,  and  if 
by  mistake  a  check  is  paid  when  the  drawer  has  no  funds,  the 
bank  must  look  to  the  customer  for  rectification,  not  to  the  party 
to  whom  the  check  was  paid." 

The  cashing  of  a  post-dated  check  is  so  clearly  negligent  on  the 
part  of  the  bank  that  it  would  seem  that  the  bank  could  hardly 
claim  that  the  payment  was  made  under  a  mistake  of  fact  or 
through  any  misapprehension.  The  only  theory  upon  which  the 
bank  would  be  allowed  to  recover  from  the  person  to  whom  the 
money  was  paid  is  that  the  payee  fraudulently  induced  the  bank 
to  pay,  the  rule  being  well  established  that  where  the  payee  is 
a  party  to  the  fraud  by  which  money  is  obtained  improperly  on  a 
check  the  amount  can  be  recovered  from  him.  If  not  actually 
guilty  of  fraud  when  by  presenting  a  check  which  he  knows  is 
not  due  he  induced  the  bank  to  cash  it,  he  should  not  be  per- 
mitted to  take  advantage  of  his  own  wrong  and  say  that  the  bank 
was  negligent  and  should  not  have  cashed  the  check.  Even  if  he 
was  entirely  innocent  in  presenting  the  check,  he  is  in  as  good 
if  not  better  position  than  the  bank  to  know  that  the  check  is  not 
collectible  at  the  time  presented,  and  where  by  his  conduct  he  in- 
duces the  bank  to  pay  there  would  seem  to  be  good  reason  for 
holding  that  he  should  reimburse  the  bank  for  the  amount  so  paid. 

This  view  is  supported  by  Morse  in  his  discussion  of  payment 
by  mistake.  He  says : 

"Money  paid  with  full  information  as  to  the  facts,  but  in  mis- 
take of  law,  cannot  be  recovered.  But  money  paid  under  mis- 
take of  fact,  the  error  not  being  negligent,  or  if  negligent  not 
causing  loss  to  the  payee,  or  if  both  negligent  and  causing  loss, 
yet  the  payee  was  negligent  equally  with  or  to  a  greater  degree 
than  the  payer,  can  be  recovered."  Morse  on  Banks  and  Banking, 
5th  Ed.,  Vol.  I,  p.  56. 

There  is  no  way  to  tell,  of  course,  what  view  the  courts  might 
take  of  the  question.  It  might  be  held,  and  with  considerable 
reason,  that  the  payment  having  been  made  carelessly  and  negli- 
gently by  the  bank,  when  the  check  itself  showed  on  its  face  that 
it  was  not  entitled  to  payment,  could  not  be  recovered.  On  the 
otherhand,  it  might  be  held  that  the  payee  having  induced  the 
bank  to  pay  could  not  take  advantage  of  such  payment  and  hold 
the  money  at  the  expense  of  the  bank.  There  would  seem  to  be 
very  good  reason  for  holding  that  the  bank  should  have  the  right 
to  recover  the  money. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  281 

Over  Payment  by  Drawee  Bank  Through  Mistake  of  Fact 
Can  Be  Recovered. 

Where  a  check  drawn  for  $125.00  in  the  body,  but  with  marginal  figures 
$175.00,  is  cashed  at  the  latter  figure,  and  after  passing  through  two  or 
three  other  banks  is  finally  paid  by  the  bank  on  which  it  is  drawn  at 
$175.00,  which  bank  is  compelled  to  make  good  to  its  customer  the  amount 
paid  in  excess  of  the  face  of  the  check,  what  recourse,  if  any,  has  the 
bank? 

First.  There  is  no  doubt  that  the  written  amount  in  the  face 
of  the  check  controls  over  the  figures. 

Second.  Money  paid  by  mistake  of  fact  can  generally  be  re- 
covered from  the  payee.  A  bank  paying  a  check  by  mistake  can 
ordinarily  recover,  its  right  to  recover  being  entirely  independent 
of  the  liability  of  an  indorser,  and  being  based  on  the  principle 
that  where  one  pays  money  by  mistake  for  the  benefit  of  another, 
it  may  be  recovered  unless  the  payment  is  so  negligently  made  as 
to  be  the  fault  of  the  payer,  or  unless  the  person  to  whom  pay- 
ment is  made  is  an  innocent  holder  for  value.  Under  such  cir- 
cumstances the  equity  of  the  holder  would  be  superior  to  that 
of  the  bank. 

Applying  this  principle  to  the  case  stated,  I  should  say  that 
probably  the  bank  on  which  the  check  was  drawn  could  recover 
the  excess  payment  from  the  bank  to  which  it  was  paid.  This 
bank  could  in  turn  recover  the  amount  from  the  bank  to  which  it 
paid  the  excess  amount  and  this  bank  could  recover  from  the 
original  payee. 

NOTE. — As  to  payment  by  mistake,  see  preceding  opinion. 


Undated  Checks  Are  Valid  and  Bank  May  Pay  on 
Presentation. 

Should  a  bank  cash  a  check  which  is  not  dated  ? 

I  do  not  think  the  question  has  been  passed  on  by  the  Supreme 
Court  or  the  Court  of  Appeals  of  Georgia,  and  I  have  only  been 
able  to  find  two  or  three  decided  cases  from  other  States.  The 
text  writers  seem  to  disagree  on  the  subject.  Morse  on  Bank's  and 
Banking,  says : 

"A  check  must  be  dated.  It  may'  be  dated  either  on,  before, 
or  after  the  day  it  is  issued.  But  it  would  seem  that  if  a  check  is 
not  dated  at  all,  and  contains  no  statement  of  a  date  when  it  is  to 
be  paid,  it  is  never  payable.  For  a  check  is  payable  either  on  the 
day  of  its  date,  or  else  on  some  other  day  specifically  designated  in 


282  PARK'S  BANKING  LAW  OF  GEORGIA. 

it.  So,  if  it  is  not  dated  at  all,  and  if  no  designation  occurs, 
expressed  in  the  body,  which  might  perhaps  operate  to  supply  the 
deficiency  of  a  formal  dating  it  is  reasonable  to  say  that  it  can 
never  become  due,  and  payment  can  never  be  demanded.  If  this 
rule,  which  is  not  directly  asserted  in  any  adjudication,  goes  at  all 
too  far,  it  is  nevertheless  utterly  impossible  to  doubt  that  a  bank 
would  be  fully  justified  in  refusing  to  pay  a  check  showing  an 
unexplained  deficiency  of  so  important  a  character.  It  has  been 
said  that  a  check  may  be  dated  on  Sunday,  though  it  cannot  be 
payable  on  that  day."  Morse  on  Banks  and  Banking,  §  368. 

This  view  is  concurred  in  by  Magee  on  Banks  and  Banking, 
from  which  I  also  quote: 

"If  a  check  has  no  date,  it  has  no  definite  time  for  payment.  A 
check  is  only  payable  on  the  day  of  its  date  or  on  a  day  a  future 
date,  or  at  the  time  of  presentmentsubsequent  to  its  date.  The  bank, 
therefore,  if  a  check  is  not  dated  has  no  direction  when  to  pay  or 
charge  the  drawer's  account ;  but  a  bank  may  pay  a  check  with- 
out risk  and  without  a  date  when  presented  by  and  payable  to  the 
drawer  himself.  *  *  *  But  the  bank  cannot  charge  the  de- 
positor's account  with  a  sum  of  money,  which  sum  is  to  be  paid 
to  or  transferred  to  the  account  of  another,  without  direction 
or  authority  in  writing;  and  this  authority  must  be  dated  and 
signed  by  the  party  to  be  charged. 

"The  date  is  important,  as  stated,  because  it  fixes  accurately  the 
time  in  which  payment  may  be  demanded.  It  is  not  due  until  a 
date  is  fixed.  If  it  fails  to  bear  a  date,  the  bank  is  at  once  put 
upon  inquiry  and  may  refuse  payment  upon  the  special  ground 
that  the  check  not  being  dated,  no  time  of  payment  is  fixed. 
The  fact  that  a  check  is  not  dated  or  that  the  date  is 
changed  as  stated,  would  put  the  bank  on  inquiry,  and  it  has  been 
held  that  an  undated  check  is  never  payable."  Magee  on  Banks 
and  Banking,  §  182. 

Neither  of  these  authors  cite  any  authority  for  their  statements. 

The  recent  work  of  Michie  on  Banks  and  Banking,  which  is 
by  far  the  most  exhaustive  treatment  of  the  subject,  does  not 
discuss  the  question  at  all. 

Bolles,  in  his  Modern  Law  of  Banking,  says : 

"A  check  should  be  dated.  If  it  is  not  and  contains  a  blank  to 
be  thus  filled,  the  holder  may  insert  the  date  of  its  delivery." 
Bolles,  Modern  Law  of  Banking,  p.  589. 

Th"is  would  seem  to  imply  that  the  date  is  not  essential.  Weitzel 
on  the  Law  of  Deposits,  §  67,  uses  almost  the  same  language 
as  that  quoted  from  Bolles. 

On  the  other  hand,  Tiedeman  on  Commercial  Paper,  says : 

"The  form  and  formalities  of  the  check  differ  but  little  from 
that  of  the  ordinary  bill  of  exchange.  Like  all  other  kinds  of 


OPINIONS  OF  THE  GENERAL  COUNSEL.  283 

commercial  paper,  the  check  usually  contains  a  date,  although 
this  is  not  necessary  to  the  validity  of  the  instrument.  It  may 
contain  the  true  date;  or  the  check  may  be  ante-dated  or  post- 
dated." Tiedeman  on  Commercial  Paper,  §  435. 

This  is  in  line  with  the  rule  so  far  as  other  commercial  paper  is 
concerned,  it  being  almost  universally  held  that  the  date  is  not 
essential  to  the  validity  or  negotiability  of  commercial  paper, 
and  I  am  inclined  to  think  that  this  is  the  better  doctrine.  A 
check  is  generally  regarded  as  an  inland  bill  of  exchange  drawn 
on  a  bank  or  banker,  payable  on  demand,  the  time  of  presentment 
fixing '  its  maturity.  The  date  seems  entirely  immaterial,  for 
checks  are  paid,  not  according  to  date,  but  according  to  the  time 
of  presentment  for  payment.  Of  course,  no  one  could  say  in 
light  of  the  authorities  what  a  court  might  hold.  In  my  opinion, 
however,  if  the  question  were  raised  in  Georgia,  the  court  would 
hold  that  the  date  is  immaterial,  and  that  the  bank  is  authorized 
to  pay  an  undated  check. 

The  only  decided  cases  which  I  have  been  able  to  find  are: 
Gordon  v.  Lansing  State  Savings  Bank,  133  Mich.  143,  94  N.  W. 
741,  in  which  it  was  held  that  a  date  is  not  essential  to  the  validity 
of  a  check ;  and  Weld  v.  Eliot  Five  Cent  Savings  Bank,  158  Mass. 
339,  33  N.  E.  519,  holding  that  an  undated  order  on  a  savings 
bank  for  the  payment  of  a  deposit  is  valid.  There  have  been 
a  number  of  cases  in  which  it  has  been  held  that  the  date  of  a  bill 
of  exchange  is  not  essential. 


Drawer  of  Check  Has  the  Right  to  Stop  Payment. 

Where  a  depositor  gives  notice  to  a  bank  to  stop  payment  of  a  check, 
is  the  bank  authorized  to  decline  to  pay  the  check? 

I  quote  from  two  of  the  leading  authorities  on  banks  and  bank- 
ing: 

"A  check  is  simply  a  written  order  of  a  depositor  to  his  bank 
to  make  a  certain  payment.  It  is  executory,  and  as  such  it  is  of 
course  revocable  at  any  time  before  the  bank  has  paid  or  com- 
mitted itself  to  pay  it.  But  after  the  bank  has  paid,  or  has  placed 
itself  under  an  obligation,  or  has  incurred  a  liability  to  comply 
with  the  order,  the  drawer's  power  to  revoke  is  at  an  end. 
*  *  The  bank  is  the  drawer's  agent.  Its  primary  duty  is 
to  hold  or  to  pay  his  money  as  he  directs.  Primarily  it  owes  no 
duty  to  the  holder,  except  under  and  by  virtue  of  directions  from 
the  drawer."  Morse  on  Banks  and  Banking,  5th  Ed.,  §  398. 


284  PARK'S  BANKING  LAW  of  GEORGIA. 

"An  ordinary,  uncertified  check  on  a  general  account  is  simply 
an  order  which  may  be  countermanded  and  payment  forbidden 
by  the  drawer  at  any  time  before  it  is  actually  paid,  or  accepted 
by  the  bank  on  which  it  is  drawn.  After  acceptance  or  payment, 
however,  by  the  bank,  the  drawer's  right  of  revocation  is  lost." 
Michie  on  Banks  and  Banking,  p.  1101. 

The  text  is  supported  by  any  number  of  decisions  from  the 
courts  throughout  the  country. 

Of  course,  "the  drawer  exercises  his  right  to  countermand 
payment  of  a  check  at  his  own  risk.  By  this  exercise  he  cannot 
affect  the  validity  of  a  check,  unless  procured  from  him  by 
fraud  or  mistake,  and  he  cannot  affect  it  at  all  in  the  hands  of  an 
innocent  holder  for  value."  Parker-Fain  Grocery  Company  v. 
Orr,  1  Ga.  App.  628-631. 


Bank  Paying  Check  After  Payment  Stopped  Does  So  at  Its 

Own  Risk. 

A  customer  draws  a  check  on  a  bank.  He  later  stops  payment  on  the 
check.  After  some  years  the  check  is  presented  and  is  paid,  the  bank  over- 
looking the  order  stopping  payment.  What  are  the  bank's  rights  in  the 
premises? 

A  check  is  the  order  of  the  depositor  to  pay  out  of  the  amount 
due  him  by  the  bank  a  given  sum  to  the  payee.  This  order  he  has 
the  right  to  countermand  at  any  time  before  the  actual  payment  of 
the  check,  or  before  the  bank  becomes  liable  by  certification  to  pay 
it.  If  the  bank  pays  after  the  order  is  countermanded,  that  is, 
after  payment  of  the  check  is  stopped,  it  does  so  at  its  peril,  and 
the  drawer  of  the  check  can  recover  the  amount  from  the  bank. 

So  far  as  the  person  to  whom  the  check  is  paid  is  concerned, 
payment  to  him  is  a  purely  voluntary  payment  on  the  part  of  the 
bank.  The  bank  is  in  the  same  position  as  where  it  pays  a  forged 
check;  it  cannot  in  either  case  recover  the  amount  from  the 
person  to  whom  it  paid  it,  unless  that  person  was  guilty  of  some 
fraud. 

The  only  theory  upon  which  the  bank  could  recover  would  be 
that  the  payment  was  by  mistake.  The  courts  generally  hold  that 
this  is  not  such  a  mistake  as  would  authorize  the  recovery  of  the 
amount.  The  precise  question  has  been  decided  by  the  Supreme 
Court  of  New  Jersey  in  the  case  of  The  National  Bank  of  N.  J. 
v.  Berrall,  66  L.  R.  A.  599,  from  which  I  quote : 


OPINIONS  OF  THE  GENERAL  COUNSEL.  285 

"Where  a  bank  receives  in  the  ordinary  course  of  business  a 
check  drawn  upon  it,  presented  by  a  bona  fide  holder,  who  is  with- 
out notice  of  the  fact  that  payment  thereof  has  been  stopped,  and 
the  bank  pays  the  amount  of  the  check  to  such  holder,  it  cannot 
afterwards  recover  back  the  money  as  paid  by  mistake  on  the 
ground  that  payment  of  the  check  had  been  countermanded  by  the 
drawer." 

Unless  the  party  presenting  the  check  knew  that  it  had  been 
countermanded,  or  in  some  way  misled  the  bank  in  regard  to  it, 
it  would  not  be  entitled  to  recover  the  amount  paid  from  him, 
and,  as  already  stated,  it  is,  of  course,  liable  to  make  good  the 
amount  to  the  customer  to  whose  account  it  charged  the  check. 


Payee  of  Check  Has  No  Right  to  Stop  Payment  of  a  Check. 

If  A  draws  a  check  in  favor  of  B,  and  B  endorses  it  payable  "to  the 
order  C,  can  B  then  stop  payment  of  the  check  to  C? 

The  payee  of  a  check  has  no  contractual  relation  with  the 
bank,  and,  therefore,  has  no  right  to  direct  the  bank  either  to  pay 
or  not  to  pay.  The  bank  is  not  paying  his  order  or  out  of  his 
funds,  but  is  paying  out  of  the  funds  of  the  drawer  and  upon  his 
order.  Therefore,  the  payee  of  the  check,  particularly  after  he 
has  indorsed  it  and,  therefore,  put  it  beyond  his  own  control, 
has  no  right  to  give  the  bank  any  direction  with  regard  to  it, 
and  the  bank  is  not  authorized  to  obey  his  order  to  stop  payment 
on  the  check.  Of  course,  where  a  check  has  been  stolen  or 
fraudulently  obtained  from  the  payee,  the  payee  may  notify  the 
bank  that  the  holder  is  not  entitled  to  payment,  and  the  bank,  if 
this  information  is  correct,  would  be  justified  in  refusing  payment 
to  the  holder.  But  this  is  not  upon  the  theory  of  stopping  pay- 
ment, but  is  simply  notice  that  the  holder  of  the  check  has  no 
title  to  it,  and,  therefore,  is  not  entitled  to  collect  it. 


Holder    Has    Right    of    Action    Against    Both    Drawer    and 
Indorser  When  Payment  Is  Stopped. 

A  draws  a  check  in  favor  of  B  on  an  out-of-town  bank,  which  B  in- 
dorses and  cashes  at  the  local  bank  with  which  he  does  business.  A  stops 
payment  on  the  check.  Has  the  paying  bank  any  recourse  on  the  maker 
and  indorser  6f  the  check? 

The  drawer  of  a  check  has  the  right  to  stop  payment  on  it 
either  with  or  without  reason  for  so  doing,  and  the  bank  on  which 


286  PARK'S  BANKING  LAW  OF  GEORGIA. 

the  check  is  drawn  must  respect  the  request  of  the  drawer  to  stop 
payment.  But  a  check  is  a  negotiable  instrument,  and  a  bona  fide 
holder  for  value,  where  payment  has  been  stopped,  may  have  re- 
course on  both  the  drawer  and  indorsers  of  the  check. 

In  the  case  stated  it  is  assumed  that  the  bank  cashed  the  check, 
without  any  notice  that  payment  had  been  stopped  or  that  there 
was  any  other  defect  connected  with  it.  If  this  is  the  case,  that 
bank  has  the  right  to  bring  suit  against  the  drawer  and  indorser  of 
the  check  to  collect  the  amount  paid  out  on  it. 


When  Check  Is  Accepted  for  Deposit  After  Banking  Hours 
on  Condition  That  Payment  Is  Not  Stopped  Before  the 
Following  Day,  Bank  May  Charge  Check  to  Depositor  if 
Payment  Is  Stopped. 

After  business  hours  on  Saturday  a  check  was  deposited,  the  teller  ad- 
vising the  depositor  that  the  drawer  of  the  check  would  have  until  the 
opening  of  the  bank  for  business  on  Monday  within  which  to  stop  payment. 
Before  the  bank  opened  on  Monday  the  drawer  of  the  check  notified  the 
bank  to  stop  payment.  Is  the  bank  liable  to  the  depositor  for  the  amount 
of  the  check? 

The  check  having  been  offered  to  the  bank  for  deposit  after 
business  hours,  the  bank  was  under  no  obligation  to  accept  the 
deposit.  It  did  not  accept  it  unconditionally,  but  advised  the 
depositor  that  it  would  accept  the  deposit  subject  to  the  right  of 
the  drawer  to  stop  payment  on  the  check.  The  bank  could  have 
refused  to  accept  the  deposit  altogether.  If  it  accepted  it  on 
condition,  the  depositor  has  no  right  to  insist  that  it  was  an  un- 
conditional acceptance.  It  was  practically  agreed  that  the  de- 
posit would  be  taken,  but  entered  during  business  hours  on  the 
next  regular  business  day.  In  the  meantime  the  deposit  was  held 
subject  to  the  right  of  the  drawer  of  the  check  to  stop  payment, 
and  the  depositor  took  this  risk.  I  do  not  think  the  depositor  has 
any  right  to  complain  that  payment  was  stopped  on  the  check,  and, 
therefore,  the  amount  charged  back  to  his  account. 


Bank  Has  No  Right  to  Stop  Payment  of  Its  Cashier's  Check. 

Can  a  bank  refuse  payment  of  its  cashier's  check  which  was  indorsed 
drawee  and  cashed  by  another  bank  in  good  faith,  the  payee  claim- 
ing that  the  check  was  taken  from  him  by  force  after  it  was  indorsed  and 
requesting  the  drawee  bank  to  stop  payment  on  the  check? 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  287 

The  rule  applicable  to  cashiers'  checks  is  stated  in  Michie  on 
Banks  and  Banking,  p.  1105,  as  follows: 

"A  cashier's  check,  being  merely  a  bill  of  exchange  drawn  by  a 
bank  on  itself,  and  accepted  in  advance  by  the  act  of  its  issuance, 
is  not  subject  to  countermand  by  the  payee  after  indorsement, 
as  is  an  ordinary  check  by  the  drawer,  and  the  relations  of  the 
parties  to  such  an  instrument  are  analogous  to  those  of  the  par- 
ties to  a  negotiable  note  payable  on  demand." 

This  states  the  law  on  the  subject.  The  drawee  bank  would  not 
be  authorized  to  refuse  payment  of  the  check  if  the  bank  which 
cashed  it  and  is  presenting  it  for  payment  is  the  bona  fide  holder 
of  it.  That  bank  has  all  the  rights  of  a  bona  fide  holder  if 
it  took  the  check  without  notice  that  it  was  taken  by  force 
from  the  payee  after  it  was  indorsed,  and  the  fact  that  it  was  so 
taken  would  not  affect  its  right  to  have  the  check  paid  upon 
presentation. 


Indorser  on  Whose  Credit  Money  Is  Loaned  Which  Is  De- 
posited to  Credit  of  the  Maker,  Has  No  Right  to  Stop 
Payment  of  Checks  Against  the  Deposit. 

A  borrows  money  from  a  bank  on  B's  indorsement,  which  is  required 
by  the  bank.  The  money  is  deposited  in  the  bank  to  A's  credit,  in  a  gen- 
eral deposit.  B  subsequently  notifies  the  bank  not  to  honor  A's  checks  on 
this  fund.  If  the  bank  follows  B's  instructions  and  refuses  to  pay  a  check 
drawn  by  A,  is  it  liable  to  A? 

The  bank  would  not  be  justified  in  refusing  payment  of  the 
check  under  the  circumstances  stated.  The  deposit  apparently 
was  made  to  the  individual  credit  of  A  without  any  conditions  or 
restrictions  whatsoever.  While  it  is  true  that  he  borrowed  money 
on  the  strength  of  the  indorsement  of  another  person,  yet  with 
the  consent  of  that  person  the  money  was  deposited  to  his  own 
credit,  and  he  was  entitled  to  control  it.  The  fact  that  the  money 
was  obtained  on  another's  indorsement  would  not  give  that  other 
the  right  to  control  the  deposit. 

The  bank  would  be  liable  in  damages  for  dishonoring  the 
check.  If  it  had  refused  to  comply  with  the  request  of  the  in- 
dorser,  this  would  not  have  increased  his  liability  in  any  way  or 
released  him  as  indorser.  He  had  no  control  over  the  money 
whatever,  and,  therefore,  had  no  right  to  stop  payment  of  the 
check. 


288  PARK'S  BANKING  LAW  OF  GEORGIA. 

Bank  Is  Liable  to  Make  Good  a  Check  Which  It  Pays  Upon 
a  Forged  Indorsement. 

Where  a  bank  pays  a  check  upon  a  forged  indorsement  of  the  payee's 
signature  and  charges  the  check  to  the  depositor's  account,  is  it  liable  to 
the  depositor  to  make  good  the  amount  upon  the  discovery  of  the  forgery? 

The  case  of  the  Atlanta  National  Bank  v.  Burke,  81  Ga.  597, 
seems  to  be  one  of  the  leading  cases  upon  the  subject  and  is  very 
frequently  cited  by  the  courts  and  text  writers. 

"That  Burke  was  himself  imposed  upon  by  the  forgery  by 
Knapp  of  the  name  of  Knapp's  wife  as  maker  and  grantor  of  a 
note  and  deed,  would  not  preclude  Burke  from  complaining  of  the 
payment  by  a  bank  of  a  check  drawn  upon  it  by  Burke  in  favor 
of  Mrs.  Knapp  to  Knapp,  upon  the  forged  indorsement  by  Knapp 
of  her  name  upon  said  check.  Nor  is  it  true  that,  because  Knapp's 
own  indorsement  was  genuine  and  followed  the  forged  indorse- 
ment of  his  wife's  name  and  he  was  the  last  indorser,  the  bank 
was  not  bound  to  look  to  the  genuineness  of  her  indorsement. 

"When  the  bank  reported  to  Burke,  in  a  statement  of  its  ac- 
count with  him  and  return  of  his  bank  book  with  the  check  in 
question,  that  it  had  paid  the  money  on  the  check,  it  appearing 
therefrom  that  the  money  was  so  paid  on  the  indorsement  of 
Mrs.  Knapp  though  actually  paid  to  Knapp,  he  being  the  last  in- 
dorser, Burke  had  a  right  to  rely  upon  the  supposition  that  Mrs. 
Knapp's  indorsement  was  genuine,  there  being  nothing  to  put  him 
upon  notice  that  it  was  forged." 

The  doctrine  of  the  case  appears  to  be  well  established.  Under 
this  case,  I  hardly  see  how  the  -bank  can  escape  liability.  The 
drawer  of  the  check  directed  the  bank  to  pay  to  a  named  person 
or  to  that  person's  order.  It  did  not  comply  with  this  direction 
when  it  paid  to  anyone  else. 

The  rule  that  a  bank  is  liable  to  the  drawer  of  a  check,  where 
it  pays  upon  a  forged  indorsement,  is  thoroughly  established.  It 
is  very  clearly  stated  in  Morse  on  Banks  and  Banking,  §  474, 
where  a  number  of  cases  are  quoted  and  others  cited : 

"Where  a  check  is  drawn  payable  to  the  order  of  any  actually 
existing  person  or  corporation,  if  the  order  or  indorsement  of 
such  payee  is  forged,  payment  by  the  bank  is  no  acquittance. 

"The  depositor  has  directed  payment  to  be  made  in  a  certain 
manner ;  a  payment  made  otherwise  than  according  to  his  direc- 
tions is  no  discharge  of  the  bank's  obligations  towards  him. 
Neither  has  the  holder,  under  a  forged  indorsement,  any  title  to 
the  paper,  or  any  right  to  receive  payment  upon  it." 

There  is  also  an  elaborate  discussion  of  the  question  in  the 
work  of  Michie  on  Banks  and  Banking  on  pages  1093,  1097,  1203, 
1209-13,  apparently  citing  all  of  the  decided  cases. 


OPINIONS  OF  THE  GENERAL,  COUNSEL.  289 

The  Supreme  Court  of  the  United  States  in  Leather  Manufac- 
turers National  Bank  v.  Merchants  National  Bank,  128  U.  S.  26, 
32  L.  Ed.  342,  states  the  rule  thus : 

"A  bank  cannot  discharge  its  liability  to  account  with  the  de- 
positor to  the  extent  of  the  deposit  except  by  payment  to  him  or 
to  the  holder  of  a  written  order  from  him,  usually  in  the'  form 
of  a  check.  If  the  bank  pays  out  money  to  the  holder  of  a  check 
upon  which  the  name  of  a  depositor  or  of  a  payee  or  indorsee  is 
forged,  it  is  simply  no  payment  as  between  the  bank  and  the  de- 
positor, and  the  legal  state  of  the  account  between  them  and  the 
legal  liability  of  the  bank  to  him  remain  just  as  if  the  pre- 
tended payment  had  not  been  made." 

There  are  a  great  many  other  authorities  to  the  same  effect 
which  are  cited  in  Michie. 


Bank  Generally  Held  to  Be  Liable  for  Paying  Check  to  Person 
of  Same  Name  as  the  Payee. 

Is  a  bank  liable  for  paying  a  check  to  a  person  of  the  same  name  as  the 
payee  where  it  has  no  means  of  knowing  that  payment  is  being  made  to 
the  wrong  person? 

It  has  been  held,  generally,  that  the  bank  making  the  payment  is 
liable.  See  note  to  Weisberger  Co.  v.  Barberton  Sav.  Bank 
(Ohio),  34  L.  R.  A.  (N.  S.)  1100. 

This  seems  to  be  the  weight  of  authority,  but  it  is  too  harsh  a 
rule.  It  is  not  supported  by  reason,  and  the  cases  so  holding 
have  been  severely  criticized.  The  drawer  of  the  check  directs 
payment  to  a  named  individual.  The  check  gives  no  other  de- 
scription than  the  name.  The  bank  making  the  payment  ordi- 
narily must  satisfy  itself  that  the  person  demanding  payment  is  the 
person  named  in  the  check  as  payee,  but  it  can  not  do  more  than 
ascertain  that  the  person  presenting  the  check  is  the  person  whom 
he  purports  to  be,  and  when  it  has  done  this  it  has  fully  met  all 
the  requirements.  It  is  utterly  impossible  for  the  bank  to  know 
which  of  two  John  Smiths  is  intended,  when  there  is  no  other 
description  than  the  name  given  in  the  check.  Under  these  cir- 
cumstances, I  think  the  bank  should  be  protected  in  paying  the 
check,  and  the  drawer  should  lose  the  amount  of  it.  Of  course, 
if  there  is  anything  to  put  the  bank  on  notice  that  the  wrong 
person  presented  the  check,  it  should  not  be  protected  in  such  pay- 
ment. 


290  PARK'S  BANKING  LAW  OF  GEORGIA. 

Nondrawee  Bank  Liable  Where  It  Cashes  Check  on  Indorse- 
ment of  Person  of  Same  Name  as  Payee. 

Where  a  person  having  the  same  name  as  the  payee  of  a  check  indorses 
the  check  and  it  is  cashed  by  a  non-drawee  bank,  which  has  no  reason  to 
suspect  that  such  person  is  not  the  payee,  is  the  bank  liable  for  the  amount 
paid  on  the  check? 

It  is  well  settled,  where  a  person  having  the  same  name  as  the 
intended  payee  of  a  check,  but  who  is  not  the  same  person,  in- 
dorses the  check,  that  such  indorsement  is  a  forgery,  although  the 
person  signing  signs  his  own  name  and  makes  no  attempt  to  copy 
the  signature  of  the  real  payee.  No  title  passes  on  a  forged 
indorsement,  and  where  a  bank  pays  a  check  upon  a  forged  in- 
strument, it  cannot  charge  its  depositor  with  the  amount  so  paid, 
although  it  may  have  acted  in  perfect  good  faith. 

The  rule  is  also  well  settled  that  where  a  nondrawee  bank  pays 
a  check  upon  a  forged  indorsement  the  bank  on  which  the  check 
is  drawn,  having  paid  the  check  on  the  strength  of  the  prior  in- 
dorsement of  the  first  bank,  can  recover  the  amount  so  paid,  the 
reason  being  that  a  bank  is  under  no  obligation  to  pay  a  check 
drawn  on  another  bank,  and  when  it  does  so  it  pays  at  its  peril. 
Before  paying  a  check  on  request  to  a  stranger,  a  bank  is  supposed 
to  require  identification  and  proof  sufficient  to  enable  it  to  know 
that  it  is  paying  to  the  right  party,  and  the  bank  on  which  the 
check  is  drawn  may  assume  that  the  paying  bank  has  made  such 
an  investigation  before  the  check  was  actually  paid. 

If  in  the  case  stated,  the  bank  on  which  the  check  is  drawn 
can  show  that  the  check  has  been  paid  to  the  wrong  person,  al- 
though paid  to  a  person  of  the  same  name,  it  could  be  compelled 
to  reimburse  the  amount  paid.  The  bank  could  recover  of  the 
person  for  whom  it  cashed  the  check  the  amount  which  was  paid 
to  him,  and  this  seems  to  be  the  only  way  in  which  the  bank  could 
reimburse  itself.  If  the  nondrawee  bank  indorsed  the  check,  it 
would  be  liable  as  indorser,  for  an  indorser  .guarantees  the  genu- 
ineness of  all  previous  signatures. 


Nondrawee  Bank  Not  Liable  for  Cashing  Check  Presented 
by  Named  Payee  When  Drawer  Intended  a  Different 
Payee. 

A  bank  issues  a  cashier's  check,  making  it  payable  to  a  named  person, 

h  intending  to  make  it  payable  to  another.    The  check  is  forwarded 

by  mail  and  is  received  by  a  person  bearing  the  name  which  is  written  in 


OPINIONS  OE  THE  GENERAL  COUNSEL.  291 

the  check  as  the  name  of  the  payee.  This  person  indorses  the  check  and 
has  it  cashed  by  another  bank.  Can  the  first  bank  hold  the  paying  bank 
liable? 

Where  the  bank  issuing  the  cashier's  check  makes  it  payable 
to  a  named  person,  intending  to  make  it  payable  to  another,  the 
paying  bank  could  not  by  any  kind  of  inquiry  ascertain  what  was 
in  the  mind  of  the  cashier  when  he  drew  the  check.  How  it  would 
be  possible  to  make  the  paying  bank  responsible  for  the  mistake 
of  the  cashier  drawing  the  check  is  more  than  I  can  understand. 
Of  course,  if  there  was  .anything  suspicious  about  the  circum- 
stances surrounding  the  cashing  of  the  check,  the  paying  bank 
might  be  justified  in  refusing  to  cash  it,  but  I  do  not  under- 
stand that  there  was  anything  of  that  nature  in  this  transac- 
tion. It  appears  that  the  check  was  drawn  payable  to  a  named 
party,  that  a  party  by  that  name  and  known  to  the  paying  bank  to 
be  a  person  of  that  name  presented  the  check  for  payment,  and 
that  it  was  cashed  by  this  bank. 

It  seems  to  me  that  the  only  recourse  of  the  bank  that  issued 
the  check  is  on  the  party  who  got  the  check,  and  who,  knowing 
that  it  must  have  been  intended  for  another,  cashed  it  himself. 
Clearly  the  bank  paying  the  check  is  not  responsible,  unless  it 
could  be  shown  that  it  in  some  way  participated  in  the  fraud  of 
the  party  cashing  the  check. 


Drawer  Not  Liable  on  Check  Bearing  His  Signature  Only, 
Which  Is  Stolen  and  Blanks  Filled  in. 

A  check  bearing  only  the  name  of  the  drawer  is  stolen  from  the  drawer's 
check  book.  If  the  check  is  filled  out  and  negotiated,  is  the  drawer  liable 
to  an  innocent  holder?'  Would  not  the  principle  that  one  is  liable  where 
he  puts  it  in  the  power  of  another  to  do  harm,  make  the  drawer  liable? 

This  question  has  been  variously  decided  by  different  courts. 
The  weight  of  authority  seems  to  be  that  a  negotiable  paper,  note, 
bill  of  exchange,  or  check,  which  is  stolen  before  delivery  has  no 
validity  and  is  void  even  in  the  hands  of  a  bona  fide  holder.  The 
Supreme  Court  of  Georgia  in  the  case  of  Reese  v.  Fidelity  Assur- 
ance Society,  111  Ga.  482,  held  that  "delivery  is  essential  to  the 
validity  of  a  promissory  note."  In  support  of  this  decision,  the 
court  cites  Tiedeman  on  Commercial  Paper,  §  34,  from  which  is 
taken  the  following  quotation : 

"Until  the  bill  or  note  has  been  delivered  to  the  payee,  it  can 
have  no  validity.  Intentional  delivery  is  also  essential.  For, 


292  PARK'S  BANKING  LAW  OF  GEORGIA. 

while  the  possession  of  a  commercial  paper  by  the  payee  or 
some  one  else,  other  than  the  maker  or  acceptor,  to  whom  on  its 
face  it  appears  to  be  payable,  is  prima  facie  evidence  of  a  good 
title,  yet  it  is  not  conclusive;  and  if  it  be  shown  that  there  has 
beeri  no  delivery  to  the  payee,  it  is  valueless  even  in  the  hands  of 
an  innocent  purchaser.  As  long  as  a  bill  or  note  has  not  been 
delivered,  it  is  a  nullity." 

The  Supreme  Court  also  cites  1  Daniel  on  Negotiable  Instru- 
ments, §  63,  which  is  to  the  same  effect.  This  writer  says  also, 
on  page  1016,  that  where  an  incomplete  instrument  has  been 
signed  and  stolen  without  any  delivery,  and  the  blank  has  been 
filled,  it  is  sheer  forgery,  in  which  the  maker  is  not  involved, 
and  on  which  paper  he  is  not  bound. 

Nor  would  the  well-known  principle  that  a  person  is  liable 
where  he  puts  it  into  the  power  of  another  to  do  harm,  render 
the  drawer  liable.  It  is  on  this  principle  that,  where  a  person 
delivers  a  note  or  check  signed  in  blank  to  an  agent  or  other 
person  to  fill  in  the  blank,  he  is  bound  for  the  amount  of  the 
note  or  check  as  filled  in,  although  it  may  be  for  a  much  larger 
amount  than  was  authorized.  As  was  stated  by  the  Supreme 
Court  of  the  United  States  in  Bank  of  Pittsburgh  v.  Neal,  22 
How.  107,  16  L.  Ed.  328. 

"Where  a  party  to  a  negotiable  instrument  intrusts  it  to  the 
custody  of  another,  with  blanks  not  filled  up,  whether  it  be  for 
the  purpose  to  accommodate  the  person  to  whom  it  was  intrusted, 
or  to  be  used  for  his  own  benefit,  such  negotiable  instrument  car- 
ries on  its  face  an  implied  authority  to  fill  up  the  blanks  and 
perfect  the  instrument;  and  as  between  such  party  and  innocent 
third  parties,  the  person  to  whom  it  was  so  intrusted  must  be 
deemed  the  agent  of  the  party  who  committed  such  instrument  to 
his  custody — or,  in  other  words,  it  is  the  act  of  the  principal,  and 
he  is  bound  by  it." 

But  where  the  instrument  is  not  delivered  at  all,  but  is  stolen 
from  the  maker  in  an  incomplete  state,  there  is  no  authority  to  the 
thief  to  fill  in  the  blanks,  and  it  can  hardly  be  said  that  the  negli- 
gence of  the  maker  in  leaving  the  paper  where  the  thief  could  get 
hold  of  it  was  the  proximate  cause  of  the  injury  to  the  innocent 
holder.  The  leading  case  on  the  subject  is  Baxendale  v.  Bennett, 
L.  R.  3  Q.  B.  D.  525,  decided  by  the  English  Court  of  Appeals, 
where  an  acceptance  on  an  unsigned  draft  was  stolen  from  the 
drawer  of  the  acceptor.  In  this  case  it  was  held  that  the  negli- 
gence of  the  defendant  in  accepting  the  draft  and  leaving  it  in  his 
desk  would  not  justify  a  recovery.  I  quote  from  the  opinion: 


OPINIONS  OF  THE  GENERAL  COUNSEL.  293 

"Suppose  he  had  signed  a  blank  check  with  no  payee  or  date 
or  amount,  and  it  was  stolen,  would  he  be  liable  or  accountable, 
not  merely  to  his  banker,  the  drawee,  but  to  a  holder?  *  *  * 
I  can  not  think  so.  *  *  *  The  defendant  has  not  voluntarily 
put  into  anyone's  hands  the  means,  or  part  of  the  means,  for  com- 
mitting the  crime.  But  it  is  said  that  he  has  done  so  through  neg- 
ligence *  *  *  But  then  this  negligence  is  not  the  proximate 
or  effective  cause  of  the  fraud.  A  crime  was  necessary  for  its 
completion." 

This  case  is  cited  by  all  of  the  textbooks  on  negotiable  instru- 
ments, and  most  of  the  decided  cases.  The  Supreme  Court  of  the 
United  States  in  the  case  of  District  of  Columbia  v.  Cornell,  130 
U.  S.  655,  32  L.  Ed.  1041,  cites  it  with  approval,  the  court  holding 
that  "when  the  maker  of  a  negotiable  instrument  lawfully  cancels 
it  before  maturity,  his  liability  upon  it  is  extinguished,  and  can- 
not be  revived  without  his  consent."  In  that  case  the  cancelled 
instrument  had  been  stolen  and  the  cancellation  erased,  and  the 
paper  sold  to  a  bona  fide  holder. 

The  case  of  Knoxville  National  Bank  v.  Clark,  51  la.  264,  33 
Am.  Rep.  129,  states  the  reasons  usually  given  for  holding  the 
drawer  of  a  check  or  maker  of  a  note  liable  under  such  circum- 
stances, and  answers  them  as  follows : 

1.  That  the  drawer  is  estopped  from  showing  the  truth.    This 
has  been  exploded  in  both  England  and  in  this  country.     The 
drawer  has  not  done  or  omitted  to  do  anything  upon  which  an 
estoppel  can  be  based. 

2.  That  the  drawer  of  the  check  was  negligent  in  leaving  it  in 
an  incomplete  condition.    But  it  could  not  be  anticipated  that  such 
negligence  would  cause  another  to  commit  a  crime.    And  can  it 
be  said  that  a  person  is  negligent  who  does  not  anticipate  and  pro- 
vide against  the  thousand  ways  through  or  by  which  crime  is 
committed?     Is  it  not  requiring  of  the  ordinary  business  man 
more  diligence  than  can  be  maintained  on  principle,  or  is  practi- 
cable, if  he  is  required  so  to  protect  and  guard  his  business  trans- 
actions that  he  can  not  be  held  liable  for  the  criminal  acts  of  an- 
other?   If  the  drawer  is  liable  on  the  theory  of  negligence,  wh> 
should  not  the  negligence  of  the  owner  of  goods  which  are  stolen 
excuse  the  bona  fide  purchaser? 

3.  That  when  one  of  two  innocent  persons  must  suffer  by  the 
wrongful  act  of  another,  he  must  suffer  who  placed  it  in  the 
power  of  such  third  person  to  do  the  wrong.    It  seems  that  such 
rule  can  have  no  application  to  this  class  of  cases.    It  has  never 


294  PARK'S  BANKING  LAW  OF  GEORGIA. 

been  carried  to  the  extent  of  making  one  person  civilly  liable  for 
the  crime  of  another,  and,  on  principle,  we  think  it  can  not  be. 

4.  That  the  free  interchange  of  negotiable  paper  requires  the 
establishment  of  this  rule.  But  at  the  present  day  negotiable 
paper  is  not  ordinarily  freely  received  from  unknown  persons. 
The  necessities  of  trade  and  commerce  do  not  require  the  law  to 
be  so  construed  as  to  compel  a  person  to  perform  a  contract 
he  never  made,  and  which  it  is  proposed  to  fasten  on  him  because 
some  one  has  committed  a  forgery  or  other  crime. 

It  is  probable,  as  was  stated  in  the  case  of  Salley  v.  Terrill, 
95  Me.  553,  55  L.  R.  A.  730,  "that  there  may  be  such  gross  care- 
lessness or  recklessness  of  the  maker  in  allowing  an  undelivered 
note  to  get  into  circulation  as  will  justly  estop  him  from  setting 
up  nondelivery,  as  if  he  were  knowingly  to  throw  it  into  the  street, 
or  otherwise  leave  it  accessible  to  the  public,  with  no  person  pres- 
ent to  guard  against  its  abstraction  under  circumstances  where  he 
might  reasonably  apprehend  that  it  would  be  taken."  But  I  do 
not  think  the  signing  of  a  check  and  leaving  it  in  the  drawer's 
check  book  in  his  desk  or  at  his  place  of  business  would  be  con- 
sidered such  gross  carelessness  or  recklessness  as  to  make  him 
liable  where  it  was  stolen,  the  blanks  filled  in  and  the  check  nego- 
tiated. 

As  stated  in  the  beginning,  some  of  the  courts  hold  the  maker 
liable  under  these  circumstances,  but  the  weight  of  authority 
seems  to  be  against  this  view.  And  I  think  that  in  Georgia,  where 
our  Supreme  Court  holds  delivery  essential  to  the  validity  of  a 
commercial  instrument,  it  would  take  a  very  unusual  case  of  neg- 
ligent conduct  of  the  part  of  the  drawer  of  an  incomplete  check 
to  make  him  liable  where  it  was  stolen  and  negotiated  without  his 
authority. 


Check  Payable  to  "Cash  or  Order"  Is  Payable  to  Bearer  and 

Is  Valid. 

Is  a  check  payable  to  "cash  or  order"  payable  to  bearer  ? 

To  be  valid  a  check  must  have  a  payee,  "but  a  check  made  pay- 
able to  an  indefinite  or  obscure  thing,  for  example,  'to  the  order  of 
1658'  or  'bills  payable/  is  held  to  be  payable  to  bearer.  The  same 
rule  applies  to  a  check  payable  to  a  fictitious  payee."  Belles' 
Modern  Law  of  Banking,  p.  595.  I  quote  also  from  Magee  on 
Banks  and  Banking,  p.  310:  "It  is  held  that  where  a  check  is 


OPINIONS  of  THE  GENERAL  COUNSEL.  295 

drawn  payable  to  a  fictitious  person  or  to  a  name  or  figure,  as  for 
example  '1913'  or  a  w<5rd  'rent,'  it  is  in  law  regarded  as  payable  to 
bearer  and  is  transferrable  on  delivery."  Of  course,  a  check  pay- 
able to  "cash"  is  as  definite  as  one  payable  to  "bills  payable"  or 
to  "rent,"  and  would  be  regarded  as  payable  to  bearer. 


COLLATERAL. 


Holder  of  Collateral  Is  a  Purchaser  for  Value. 

Does  the  holder  of  a  promissory  note  as  collateral  for  a  debt  stand  in 
the  same  position  as  a  purchaser? 

It  is  expressly  provided  by  the  Code  that : 

"The  holder  of  a  note  as  collateral  security  for  a  debt  stands 
upon  the  same  footing  as  the  purchaser."  Park's  Ann.  Code, 
S  4289. 


When  Husband  Pledges  Wife's  Bonds,  the  Pledgee  Without 
Notice  Is  Protected. 

A  gentleman  borrows  money  from  the  bank  on  city  bonds  which  he 
brings  in  and  delivers.  Years  afterwards  his  wife  claims  the  bonds  as  being 
her  personal  property.  Where  does  the  bank  stand? 

I  quote  from  an  excellent  opinion  by  the  Court  of  Appeals  the 
rule  which  governs  in  such  cases : 

"The  purchaser  for  value  of  a  commercial  paper  who  takes  it 
from  the  apparent  owner  acquires  a  good  title  as  against  an  un- 
disclosed true  owner,  in  the  absence  of  mala  fides.  Mere  want  of 
such  caution  in  the  purchaser  as  ordinarily  prudent  men  usually 
exercise  in  other  transactions  is  not  suffcient  to  defeat  his  title. 

"Ordinarily,  where  commercial  paper  is  offered  in  the  usual 
course  of  business,  the  purchaser  need  not  make  inquiry  as  to  the 
ownership,  when  the  transaction  appears  regular  on  its  face. 

"If  the  purchaser  knows  or  has  reasonable  cause  to  believe 
that  the  apparent  owner  is  not  the  true  owner,  and  enters  into 
privity  or  participation  in  the  fraud  upon  the  true  title,  his  title 
is  defeasible."  Third  National  Bank  v.  Poe,  5  Ga.  App.,  pp.  113. 
114. 

In  the  case  cited  a  husband,  who  was  indebted  to  a  bank, 
brought  to  the  bank  a  cashier's  check  of  another  bank  pay- 
able to  his  order,  indorsed  it,  deposited  it  to  his  credit  and  gave 
his  personal  check  in  settlement  of  his  note  due  the  bank.  It 
was  held  that  the  bank  in  the  absence  of  bad  faith  on  its  part  was 


296  PARK'S  BANKING  LAW  OF  GEORGIA. 

not  liable  in  an  action  brought  by  the  wife  to  recover  the  value  of 
the  cashier's  check,  although  it  was  obtained  with  her  money  and 
although  the  bank  which  accepted  it  had  cause  to  suspect  that  the 
wife  was  in  some  way  instrumental  in  procuring  it  for  the  hus- 
band. 

Judge  Bleckley  once  said,  in  a  case  in  which  a  wife  brought 
suit  to  recover  money  which  had  been  paid  by  her  husband  to  his 
creditors,  that 

"It  is  only  where  notice  is  brought  home  that  a  wife's  rights 
will  be  saved.  The  burden  of  proof  is  upon  her,  for  in  every 
case  where  money  is  received  and  value  given,  there  is  a  presump- 
tion that  title  passes,  which  stands  until  it  is  rebutted  by  evi- 
dence. And  the  measure  of  evidence  should  not  be  too  scant  in 
mere  deference  to  sex.  When  man  and  wife  cooperate  for  good 
they  can  do  much  good ;  and  so,  when  they  combine  against  third 
persons  and  cooperate  for  evil,  they  can  do  much  harm.  In 
protecting  women,  courts  and  juries  should  be  careful  to  protect 
men,  too,  for  men  are  not  only  useful  in  general  society,  but  to 
women  especially."-  Humphrey  v.  Copeland,  54  Ga.  543. 


Pledgee  Liable  for  Value  of  Collateral  Lost  Through  His 
Negligence. 

A  customer  borrows  money  from  a  bank,  pledging  as  collateral  a  note 
retaining  title  to  a  mule.  This  collateral  note  is  lost  by  the  bank.  Is  the 
bank  liable  to  its  customer  for  the  amount  of  this  note? 

Under  our  Code,  §  3535,  the  pledgee  of  promissory  notes  or 
other  evidences  of  debt  must  exercise  ordinary  care  in  collecting 
and  securing  the  same.  Where  loss  results  to  the  pledger  on  ac- 
count of  the  failure  of  the  pledgee  to  exercise  such  ordinary  care 
and  diligence,  the  pledgee  is  liable  for  such  loss.  So  if  the  note 
was  lost  through  the  careless  handling  or  negligence  of  the  bank, 
the  bank  would  be  liable  to  its  customer  for  whatever  loss  he  might 
sustain  by  reason  of  its  negligence.  The  mere  loss  of  a  paper,  how- 
ever, does  not  necessarily  result  in  any  damage.  Suit  may  still 
be  entered  on  the  paper  in  spite  of  its  loss,  and  it  may  be  collected 
just  as  though  the  original  paper  could  be  produced.  If  it  became 
necessary,  the  lost  paper  could  be  established  through  appropriate 
proceedings,  and  the  established  copy  would  take  the  place  in  all 
respects  of  the  lost  original. 

If  a  note  should  be  payable  to  bearer  or  indorsed  in  blank,  and 
should  get  into  the  hands  of  a  bona  fide  holder,  so  that  neither 
the  bank  nor  the  original  pledger  could  collect  it,  the  bank,  of 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  297 

course,  would  be  liable  but  ordinarily  there  is  little  danger  of 
such  a  contingency,  and  the  mere  loss  of  the  paper  would  not 
deprive  the  pledger  of  any  substantial  right,  though  it  might 
put  him  to  some  little  inconvenience.  Any  inconvenience  or  ex- 
pense resulting  from  the  loss  should,  of  course,  be  compensated 
for  by  the  bank.  The  bank  would  be  liable  only  for  the  value 
of  the  paper,  not  necessarily  for  the  amount  named  in  the  face 
of  the  paper.  In  the  case  mentioned,  if  the  maker  of  the  paper 
was  insolvent  and  the  mule  was  dead,  no  loss  would  result  to 
the  pledger,  although  the  paper  itself  could  not  be  found.  The 
burden  would  be  upon  the  customer  to  show  the  value  of  the  lost 
collateral,  and  the  bank  would  not  be  liable  for  more  than  the 
amount  of  this  loss. 


t 
The  Renewal  of  a  Note  to  Secure  Which  Another  Note  Is 

Pledged  Will  Not  Affect  'the  Liability  of  the  Maker  of 
the  Collateral  Note. 

Does  the  renewal  of  a  note  secured  by  collateral  affect  a  bank's  right  as 
the  holder  of  the  note  pledged  as  collateral,  the  principal  note  being  re- 
newed from  time  to  time  after  the  note  pledged  becomes  due? 

I  do  not  see  how  the  renewal  of  a  note  could  make  any  differ- 
ence to  the  maker  of  the  note  which  is  held  as  collateral.  The 
rule  is  that  the  holder  of  collateral  must  exercise  ordinary  dili- 
gence in  collecting  collaterals  pledged,  and  the  failure  to  exercise 
such  diligence  discharges  the  pledger ;  but  the  failure  to  collect 
promptly  would  not  affect  the  liability  of  the  maker  of  the  note 
which  has  been  pledged  as  collateral,  and  the  renewal  of  the  prin- 
cipal note  would  have  no  effect  on  the  liability  of  the  maker  of 
the  collateral  note.  Usually,  it  would  not  seem  to  be  good  policy 
to  continue  to  renew  a  note  after  collateral  has  become  due,  and 
remains  unpaid,  as  the 'failure  to  pay  the  collateral  note  would 
seem  to  indicate  that  it  is  of  doubtful  value ;  but  I  do  not  think 
the  renewal  could  in  any  way  affect  the  liability  of  the  maker  of 
the  note  pledged  as  collateral,  the  question  as  to  whether  renewal 
should  be  made  being  merely  a  business  question,  the  legal  status 
not  being  affected  in  any  way  by  the  renewal. 


298  PARK'S  BANKING  LAW  OF  GEORGIA. 

Where  Proceeds  of  Sale  of  Collateral  Are  Sufficient  to  Cover 
Principal  and  Interest  on  Original  Note,  Adjudication  in 
Bankruptcy  Does  Not  Stop  Running  of  Interest. 

Does  the  rule  that  bankruptcy  stops  interest  on  claims  against  the  bank- 
rupt from  the  date  of  adjudication  apply  to  secured  claims,  where  the 
amount  of  the  collateral  held  as  security  is  more  than  sufficient  to  pay  both 
principal  and  interest  on  the  claim?  ' 

The  Supreme  Court  of  the  United  States  in  the  case  of  Coder, 
Trustee,  v.  Arts,  213  U.  S.  223,  53  L.  Ed.  772,  held  that  a  mort- 
gage creditor,  where  the  property  covered  by  the  mortgage  sold 
for  a  sum  sufficient  to  pay  both  principal  and  interest  of  the  mort- 
gage debt,  was  entitled  to  collect  interest  up  to  the  date  of  the  sale 
of  the  mortgaged  property.  The  same  rule  would  apply  to  a  claim 
secured  by  collateral.  Where,  however,  the  collaterals  or  other 
securities  bring  less  than  the  amount  of  the  debt,  the  creditor  is 
not  authorized  to  apply  the  proceeds  first  to  the  payment  of  in- 
terest, and  then  as  a  credit  upon  the  principal,  and -prove  his  claim 
in  bankruptcy  for  the  difference.  In  such  cases  the  running  of 
interest  stops  with  the  adjudication  of  bankruptcy,  with  this  pro- 
viso, however,  that  interest  and  dividends  upon  securities  held  by 
creditors  accruing  after  the  date  of  the  petition  in  bankruptcy 
may  be  applied  to  the  future  accruing  interest  upon  the  debt. 
This  was  held  by -the  Supreme  Court  of  the  United  States  in 
Sexton  v.  Dreyfus,  219  U.  S.  339,  55  L.  Ed.  244. 


Rights  of  Holder  of  Collateral  on  Bankruptcy  of  the  Pledger. 

Can  a  creditor  holding  a  note  secured  by  collateral  prove  his  debt  for  the 
full  amount  in  a  bankruptcy  proceeding  against  his  debtor,  proceed  to 
realize  on  his  collateral,  and  collect  dividends  on  the  full  amount  of  his 
claim?  Or  is  it  necessary  for  him  to  account  for  his  collateral  and  collect 
dividends  on  the  balance? 

A  creditor  holding  a  secured  debt  may  (a)  realize  on  the  se- 
curity according  to  the  terms  of  the  contract,  credit  the  same  on 
the  debt  and  prove  his  claim  for  the  balance;  or  (b)  prove  his 
claim  for  the  full  amount  as  an  unsecured  debt,  surrendering  the 
collateral  to  the  trustee  for  the  benefit  of  the  estate ;  or  (c)  he 
may  prove  his  debt  as  a  secured  debt,  have  his  collateral  valued 
and  credited  upon  the  claim,  and  collect  dividends  on  the  excess. 
He  can  not  prove  the  claim  as  an  unsecured  debt,  collect  dividends 
on  the  full  amount,  and  yet  hold  on  to  his  collateral.  This  seems 
to  be  very  clearly  provided  by  §  57  of  the  Bankruptcy  Act.  See 
Collier  on  Bankruptcy,  pp.  721  et  seq. 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  299 

Holder  of  Collateral  Pledged  by  Bank  May  Collect  Collateral 
Upon  Insolvency  of  Bank. 

A  bank  borrows  from  its  correspondent,  pledging  certain  of  its  custom- 
ers' notes  as  collateral.  Before  it  liquidates  its  indebtedness  a  receiver  is 
appointed  for  it.  Has  the  correspondent  bank  the  right  to  collect  the  col- 
lateral notes  which  it  holds,  or  is  it  compelled  to  turn  over  the  collateral 
to  the  receiver  of  the  insolvent  bank? 

There  can  be  no  doubt  as  to  the  right  of  the  bank  to  hold  this 
collateral  and  itself  undertake  the  collection  of  it;  and,  generally 
speaking,  this  would  be  much  better  than  undertaking  to  collect 
through  the  receiver.  It  is  a  general  custom  for  correspondent 
banks  to  undertake  to  make  their  own  collections.  Sometimes  a 
receiver  agrees  to  assist  in  making  the  collection,  but  where  he 
does  so  he  accounts  to  the  correspondent  bank.  His  collections 
are  entirely  outside  of  his  trust  as  receiver. 


Collateral  Pledged  to  Secure  Specified  Note  and  "All  Other 
Indebtedness"  May  Be  Held  Until  All  Debts  Satisfied. 

Where  a  collateral  note  recites  that  certain  described  papers  are  de- 
posited as  general  collateral  for  the  payment  of  such  note  and  of  any 
other  existing  or  future  liability  of  the  maker  to  the  payee  or  holder,  does 
the  collateral  cover  any  other  indebtedness  than  that  represented  by  the 
note  itself? 

Some  such  clause  is  usually  adopted  by  banks  in  their  col- 
lateral notes,  and  such  a  clause  is  valid.  Under  it  a  bank  would 
be  authorized  to  hold  the  collateral  to  cover  any  indebtedness  of 
the  maker  of  the  note,  althought  the  indebtedness  represented  by 
the  note  itself  might  have  been  paid.  I  quote  from  a  decision  of 
the  Supreme  Court,  which  seems  to  settle  the  question : 

"Where  one  borrows  money  from  a  bank,  and  in  the  note  given 
therefor  pledges  certain  collaterals  for  the  payment  of  that  note 
and  for  'any  general  balance  due  or  to  become  due'  the  bank,  the 
borrower  has  no  right  to  withdraw  the  collaterals  without  the 
consent  of  the  bank,  on  payment  or  tendering  payment  of  the 
note  only,  if  the  bank  is  the  holder  of  other  just  demands  against 
him  not  then  fully  secured  otherwise,  according  to  sound  business 
principles  and  the  rules  of  practical  banking."  Merchants  Na- 
tional Bank  of  Savannah  v.  Demere,  92  Ga.  735  (3). 


300  PARK'S  BANKING  LAW  OF  GEORGIA. 

Collateral  Pledged  to  Secure  All  Indebtedness  Would  Secure 

Indorsements. 

Would  the  clause  in  a  note,  "We  have  deposited  with  said  payee,  as  col- 
lateral security  for  this  note,  and  any  other  present  or  future  indebtedness 
of  ours  of  any  character  to  said  payee  or  holder,  the  following  collateral," 
be  sufficient  to  cover  the  maker's  indorsement,  either  on  papers  discounted 
by  him  or  accommodation  indorsement  on  notes  of  others? 

The  language  is  quite  broad,  and  would  seem  to  be  intended  to 
cover  just  what  it  says,  "any  other  present  or  future  indebtedness 
of  any  character."  As  an  indorsement  is  an  indebtedness,  I  think 
the  form  would  be  sufficient  to  cover  liability  as  indorser  on 
papers  discounted  or  held  by  the  bank. 


Sale  of  Collateral  Under  Power  Contained  in  Note  Valid  if 
Terms  of  Power  Strictly  Followed. 

Where  cotton  is  pledged  to  secure  a  note,  warehouse  receipts  being 
turned  over  to  the  bank,  and  where  the  note  provides  for  a  sale  of  the  col- 
lateral, can  the  cotton  be  sold  under  the  power  in  the  note  ? 

Under  the  usual  form  of  collateral  note,  the  bank  would  have 
authority  to  exercise  the  power  and  to  sell  the  cotton,  where  the 
maker  of  the  note  was  in  default,  as  provided  by  the  note.  Care 
should  be  taken  to  follow  strictly  the  terms  of  the  power;  but 
where  this  is  done  and  a  fair  and  regular  sale  is  made,  the  bank 
would  be  protected  in  making  the  sale  and  applying  the  proceeds 
to  the  satisfaction  of  the  note. 


Sale  Under  Power  in  Note  May  Be  Public  or  Private  and 
Without  Notice  When  so  Agreed. 

Is  there  any  decision  by  our  courts  in  regard  to  selling  collateral  at 
public  or  private  sale  without  notice  to  the  maker,  security  or  indorser, 
such  sale  being  authorized  by  the  pledge  agreement  contained  in  the  note 
to  secure  which  the  collaterals  are  pledged? 

The  Supreme  Court  has  upheld  such  a  sale  in  the  case  of 
Thornton  v.  Martin,  116  Ga.  115  (3),  from  which  I  quote: 

"Where  the  pledgee  is  authorized,  on  or  after  the  nonpayment 
of  the  note  at  maturity,  to  sell  the  stock  at  public  or  private  sale, 
without  advertisement  or  'giving  any  notice'  to  the  maker  and 
pledger,  the  sale  is  not  invalid  when  made  without  demand  and 
without  notice  of  the  time  or  place  of  sale,  although  not  made 
until  long  after  the  maturity  of  the  note.  Where  there  is  no 
valid  extension  of  the  note,  the  waiver  of  notice  is  not  af- 
fected by  mere  delay  in  exercising  the  power  of  sale." 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  301 

Advertisement  of  Sale  in  Sunday  Newspaper  Invalid. 

Would  advertisement  in  a  Sunday  paper  be  legal  under  a  provision  in 
a  collateral  note  providing  for  certain  advertisement  in  order  to  sell? 

This  question  seems  to  have  been  expressly  ruled  in  the  case  of 
Sawyer  v.  Cargile,  72  Ga.  290,  from  which  I  quote: 

"Sunday  is  dies  non  juridicus,  and  service  cannot  be  made,  or 
legal  notice  given  on  that  day,  or  the  business  or  work  of  ordinary 
callings  done.  Therefore,  the  publication  of  the  advertisement  of 
a  marshal's  sale  for  taxes  in  a  newspaper  appearing  on  Sunday 
was  not  legal,  and  the  sale  thereunder  passed  no  title." 


COLLECTIONS. 


General  Rules  Governing  Liability. 

D.  &  Co.  deposited  with  the  G.  Bank  their  draft  on  the  A.  Bank. 
The  bank  forwarded  the  item  for  credit  to  the  F.  Bank  in  another  city, 
which  bank  turned  the  draft  over  to  the  clearing  house  in  that  city  for  col- 
lection. The  clearing  house  forwarded  the  draft  direct  to  the  A.  Bank. 
This  bank  made  settlement  with  the  clearing  house  in  New  York  Ex- 
change. Before  this  could  be  collected  in  due  course  the  A.  Bank  was 
closed  and  the  exchange  dishonored.  What  are  the  rights  of  the  several 
parties  under  the  facts  stated? 

(1)  D.  &  Co.  are  fully  relieved  from  liability.  I  quote  from  a 
decision  of  the  Supreme  Court : 

"Where  one  gave  to  another,  in  payment  of  a  debt,  a  check 
upon  a  bank  at  which  he  had  on  deposit  sufficient  money  to  meet 
the  payment  of  the  check,  and  the  payee  deposited  the  check  for 
collection  in  another  bank,  which  immediately  forwarded  it  to 
the  drawee  bank  for  payment,  an  entry  on  its  books  by  the  drawee 
bank  charging  the  account  of  its  depositor  with  the  amount  of  the 
check  was  equivalent  to  the  payment  thereof.  The  drawee 
bank  then  held  the  amount  of  the  check  as  the  agent  of  the  payee, 
and  the  drawer  was  discharged  from  liability  on  the  debt  for 
which  the  check  was  given."  Smith  Roofing  &  Contracting  Co.  ?/. 
Mitchell,  117  Ga.  772 

D.  &  Co.  having  deposited  the  check  as  cash,  and  it  having  been 
presented  to  the  bank  on  which  it  was  drawn,  and  charged  to  their 
account,  the  check  was  paid  and  D.  &  Co.  relieved  of  further 
liability. 

Of  course,  if  the  G.  Bank  had  a  contract  with  D.  &  Co.  that 
items  taken  for  credit  were  at  their, risk,  and  that  if  returns  for 
such  items  should  be  dishonored,  the  amounts  could  be  charged 
back  to  their  account,  they  would  not  be  relieved.  In  the  'ab- 


302  PARK'S  BANKING  LAW  of  GEORGIA. 

sence  of  such  contract  D.  &  Co.  seem  clearly  to  be  relieved  of  lia- 
bility. 

(2)  The  respective  rights  and  liabilities  of  the  G.  Bank  and  the 
F.  Bank  depend  upon  the  terms  on  which  the  draft  was  for- 
warded and  acknowledged  by  the  F.  Bank;  that  is  to  say,  upon 
the  terms  of  the  contract  between  the  two  banks. 

"In  the  absence  of  a  contract,  express  or  implied,  to  the  con- 
trary, a  bank  taking  paper  for  collection  is  liable  for  the  defaults 
of  its  agents  and  correspondents  to  whom  the  paper  has  been  en- 
trusted for  collection."  Park's  Ann.  Code,  §  2362. 

"Where  *  *  *.  a  bank  received  for  collection  from  a  cus- 
tomer a  check  which  by  the  exercise  of  proper  diligence  might 
have  been  collected,  it  became,  in  the  absence  of  any  express  or 
implied  contract  to  the  contrary,  liable  for  any  neglect  of  duty 
whereby  the  collection  of  the  check  was  defeated,  whether  such 
negligence  arose  through  the  default  of  its  own  officers,  or  from 
that  of  its  correspondent  or  agent  to  whom  it  may  have  sent  the 
check  for  collection,  and  in  such  case,  it  would  be  immaterial 
whether  such  correspondent  or  agent  was  the  bank  upon  which 
the  check  was  drawn  or  another."  Bailie  v.  Augusta  Savings 
Bank,  95  Ga.  277. 

In  the  absence  of  a  contract  limiting  its  liability,  the  F.  Bank 
is  liable  to  the  G.  Bank  for  any  neglect  of  duty  in  the  collection 
of  the  check  by  itself  or  the  clearing  house,  which  was  its  agent, 
or  the  A.  Bank. 

It  is  almost  universally  held  that  it  is  negligence  in  a  collecting 
bank  to  send  a  check  for  collection  directly  to  the  bank  upon 
which  it  is  drawn. 

"If  a  bank  receiving  paper  for  collection,  payable  at  a  distant 
place,  sends  it  by  mail  to  the  payer  for  collection,  it  is  guilty  of 
negligence,  and  this,  too,  though  the  payer  is  the  only  bank  in 
the  place,  and  though  it  is  customary  thus  to  send  paper  for  col- 
lection, since  the  custom  is  unreasonable."  Michie  on  Banks  and 
Banking,  Vol.  II,  p.  1405. 

The  question  has  never  been  decided  in  Georgia,  though  it 
was  raised  in  the  Bailie  case  above  referred  to,  the  court  there 
expressly  declining  to  decide  it ;  but  there  appears  to  be  little  con- 
flict on  the  proposition  in  other  jurisdictions. 

The  general  rule  also  seems  to  be  that  a  collecting  bank  is  not 
authorized  to  receive  anything  except  money  in  payment,  and  if 
it  takes  a  check  which  is  dishonored,  it  is  liable  for  so  doing.  The 
only  exceptions  are  where  the  bank  has  special  authority  to  re- 
ceive something  other  than  money,  or  where  there  is  a  general 
custom  to  receive  something  else,  which  custom  is  known  to  the 


OPINIONS  OF  THE  GENERAL  COUNSEL.  303 

depositor,  or  is  so  universal  as  to  authorize  the  assumption  that 
he  knew  of  it. 

"In  the  absence  of  special  authority  or  well-established  custom 
to  the  contrary,  a  bank  with  which  paper  is  deposited  for  collec- 
tion has  no  authority  to  accept  anything  but  money  as  payment. 
It  can  only  receive  payment  of  the  debt  due  the  principal  in  the 
legal  currency  of  the  country,  or  in  bills  which  pass  as  money  at 
their  par  value  by  the  common  consent  of  the  community.  Thus, 
for  instance,  a  bank  receiving  paper  for  collection  has  no  author- 
ity to  accept  a  check  in  payment  thereof,  even  though  such 
check  be  certified. 

"It  has  been  held,  however,  in  a  number  of  jurisdictions  that 
a  collecting  bank  may  properly  accept  payment  other  than  money 
by  virtue  of  special  authority  from  its  principal  or  custom  known 
to  such  principal  or  obtaining  so  universally  that  the  holder  of  the 
paper  will  not  be  allowed  to  plead  ignorance  of  it."  2  M'ichie  on 
Banks  and  Banking,  pp.  1395-1398. 

"Where  a  bank  accepts  a  check  on  another  bank  in  payment  of 
a  draft  in  its  hands  for  collection  and  surrenders  the  draft,  it 
makes  the  check  its  own,  and  its  libility  is  the  same  as  if  cash 
had  been  received."  National  Bank  v.  American  Exchange  Bank 
(Mo.),  52  S.  W.  265;  Fifth  National  Bank  v.  Ashworth  (Pa.), 
2  L.  R.  A.  491. 

There  is  no  Georgia  case  on  this  precise  point,  but  it  has  been 
held  that 

"Where  a  bank  sends  an  accepted  draft  to  a  correspondent 
for  collection,  who  receives  in  payment  the  check  of  the  acceptor 
on  itself  in  the  regular  course  of  business,  the  acceptor  being 
a  depositor  with  the  collecting  bank  and  having  on  deposit  a  sum 
in  excess  of  the  check,  and  the  collecting  bank  surrenders  the 
draft  to  the  acceptor,  and  remits  its  own  check  to  the  initial  bank, 
which  check  is  not  paid  because  of  the  failure  of  the  remitting 
bank,  such  transaction  constitutes  a  payment  of  the  draft  as  be- 
tween the  drawer  and  the  acceptor,  although  the  collecting  bank 
may  have  been  insolvent  at  the  time,  its  insolvency  not  being 
known  to  its  officials  or  the  depositor."  Pollak  Brothers  v. 
Niall-Herin  Co.,  137  Ga.  23. 

Under  these  authorities,  when  the  F.  Bank  accepted  New  York 
Exchange  and  surrendered  the  draft,  it  took  the  risk  of  the 
New  York  check  being  paid.  The  draft  was  absolutely  satisfied, 
and  if  the  New  York  check  was  dishonored  for  any  reason,  the 
risk  was  that  of  the  F.  Bank  as  between  it  and  the  G.  Bank. 

Another  element  possibly  is  the  delay  in  presenting  or  report- 
ing on  the  draft.  The  rule  is  that  a  check  must  be  presented  for 
payment  within  a  reasonable  time,  and  if  the  bank  fails  be- 
tween the  time  of  drawing  and  the  presentation  of  the  check, 


304  PARK'S  BANKING  LAW  OF  GEORGIA. 

the  drawer  is  discharged  from  liability  to  the  extent  of  the  in- 
jury he  has  sustained  by  such  failure. 

"What  is  a  reasonable  time  will  depend  upon  circumstances, 
and  the  relation  of  the  parties  between  whom  the  question  arises." 
Comer  v.  Dufour,  95  Ga.  376,  378. 

If  the  delay  in  presenting  the  check  was  occasioned  by  its  being 
routed  via  F.  Bank  instead  of  being  sent  directly  for  collection 
to  the  town  in  which  A.  Bank  was  located,  then  in  order  to  escape 
liability  to  its  depositor  for  failing  to  present  the  check  at  the 
bank  on  which  it  was  drawn  within  a  reasonable  time,  G.  Bank 
would  have  to  show  that  it  was  usual  and  customary  to  so  collect 
checks  deposited  for  collection.  Each  case  must  depend  upon  its 
own  facts  both  as  to  whether  or  not  there  was  delay  and  whether 
or  not  the  route  selected  was  so  unreasonable  as  to  amount  to 
negligence  on  the  part  of  the  bank  or  its  correspondents. 

"Checks  on  out-of-town  banks,  which  are  deposited  with  a 
bank  for  collection,  must  of  necessity  be  collected  through  the 
agency  of  intermediary  or  correspondent  banks.  *  *  *  It 
should  follow  that  a  collecting  bank  is  not  guilty  of  negligence  and 
does  not  render  itself  liable  to  its  depositor  where  it  forwards  his 
check  through  one  or  more  correspondent  banks  for  collection, 
provided  the  check  is  sent  in  a  reasonably  direct  manner  and  ar- 
rives at  its  destination  for  presentment  within  a  reasonable  time." 
Brady  on  Law  of  Bank  Checks,  §  200. 

(3)  On  account  of  our  statute  above  quoted,  making  a  collect- 
ing bank  liable  for  the  negligence  of  its  agents  or  correspondents, 
it  is  customary  with  most  of  the  banks  to  have  printed  on  their 
deposit  tickets,  and  frequently  in  their  pass  books,  a  notice  that 
items  payable  outside  of  the  city  in  which  the  bank  is  located,  are 
taken  at  the  depositors'  risk,  and  that  the  bank  assumes  no  re- 
sponsibility for  neglect  or  default  of  collecting  agents. 

It  is  also  customary  for  banks  doing  any  considerable  amount 
of  collecting  to  have  printed  on  their  acknowledgments  some  simi- 
lar expressions,  frequently  adding  that  items  may  be  sent  to 
banks  on  which  they  are  drawn,  and  that  if  returns  sent  by  the 
collecting  agents  are  dishonored,  the  amount  may  be  charged 
back.  It  is  generally  held  that  such  notices  amount  to  a  contract 
and  relieve  the  bank  from  liability  for  neglect  or  default  of  their 
correspondents,  and  authorize  the  charging  back  of  items. 

"In  a  State  wherein  a  bank  is  responsible  for  the  conduct  of  a 
subagent,  it  may  by  notice  in  a  pass  book  absolve  itself  from  the 
negligence  of  the  subagent."  Bolles  on  Modern  Law  of  Bank- 
ing, p.  576. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  305 

"Where  defendant  bank  had  been  acting  as  plaintiff's  collection 
agent  for  some  time,  with  the  understanding  that  it  should  not  be 
liable  for  the  misconduct  of  its  subagents,  and  on  receipt  of  the 
item  in  question  for  collection  in  accordance  with  its  uniform 
prior  practice  acknowledged  receiving  the  check  and  incorporated 
in  the  body  of  the  receipt  a  statement  that  in  receiving  the  same 
it  acted  only  as  agent,  and  assumed  no  responsibility  for  the  acts, 
omissions,  neglect,  or  default  of  agents  or  subagents  at  other 
points,  or  for  items  lost  in  transit,  it  was  not  liable  for  the  failure 
to  collect  the  check,  due  to  the  negligence  of  a  subagent."  Cali- 
fornia National  Bank  v.  Utah  National  Bank,  190  Fed.  318  (8 
C.  C.  A.). 

The  Supreme  Court  of  Georgia  holds,  however,  that  it  is  a 
question  for  the  jury  in  each  case  from  the  course  of  dealing  be- 
tween the  parties  as  to  whether  there  was  an  implied  contract 
exempting  the  bank  from  responsibility  for  neglect  upon  the  part 
of  its  agents  or  correspondents  through  whom  it  endeavors  to 
collect  a  check  which  has  been  deposited  with  it  for  collection. 
Youmans  Jewelry  Co.  v.  Blackshear  Bank,  141  Ga.  357. 

In  the  case  of  a  savings  bank,  the  court  held 

"A  depositor  in  a  saving  bank  is  bound  by  the  reasonable  rules 
of  the  bank  to  which  he  assents  by  an  agreement  in  writing." 
Langdale  v.  Citizens  Bank  of  Savannah,  121  Ga.  105. 

If  the  F.  Bank  in  its  letter  acknowledging  receipt  of  the  draft 
protected  itself  by  a  notice  similar  to  that  above  referred  to,  and 
the  notice  authorized  it  to  forward  the  check  to  the  bank  on  which 
it  was  drawn,  and  provided  for  the  charging  back  of  such  items 
as  might  be  dishonored,  it  would  be  relieved  of  liability  and  au- 
thorized to  charge  the  item  to  the  G.  Bank.  If  it  did  not  pro- 
tect itself  by  such  a  contract  or  notice,  it  would  be  liable,  and 
would  not  have  the  right  to  charge  the  item  back. 

If  the  F.  Bank  is  authorized  to  charge  the  item  back  to  the  G. 
Bank,  whether  it  could  in  turn  charge  it  to  D.  &  Co.  would  depend 
on  whether  or  not  it  had  a  contract  with  D.  &  Co.  which  would 
authorize  it  to  do  so.  For,  as  above  stated  when  D.  &  Co.'s  draft 
was  presented  to  the  A.  Bank  and  charged  to  its  account,  it  was 
paid,  and  they  were  relieved  of  further  liability,  unless  there 
was  a  contract  which  authorized  charging  back  the  item  in  the 
event  checks  taken  in  payment  should  be  dishonored. 

NOTE. — The  foregoing  opinion  correctly  states  the  law  governing  the  col- 
lection of  checks  prior  to  the  passage  of  the  Banking  Act  of  1919,  effective 
January  i,  1920.  This  act,  however,  has  materially  modified  the  banks' 
liability. 

§  179.  "When  a  check,  draft,  note,  or  other  negotiable  instrument  is 
deposited  in  a  bank  for  credit,  or  for  collection,  it  shall  be  considered  due 
20 


306  PARK'S  BANKING  LAW  OF  GEORGIA. 

diligence  on  the  part  of  the  bank  in  the  collection  of  such  check,  draft, 
note  or  other  negotiable  instrument  so  deposited,  to  forward  and  route  the 
same  without  delay  in  the  usual  commercial  way,  according  to  the  regular 
course  of  business  of  banks,  and  the  maker,  indorser,  guarantor,  or  surety 
of  any  check,  draft,  note,  or  other  negotiable  instrument  so  deposited  shall 
be  liable  to  the  bank  until  actual  final  payment  is  received ;  and  when  a 
bank  receives  for  collection  any  check,  draft,  note,  or  other  negotiable  in- 
strument and  forwards  the  same  for  collection  as  herein  provided,  it  shall 
be  liable  only  after  actual  final  payment  is  received  by  it,  except  in  case  of 
want  of  due  diligence  on  its  part  as  aforesaid." 

§  180.  "Any  bank,  or  banker,  doing  business  in  this  State,  receiving  for 
collection  or  deposit,  any  check,  note  or  other  negotiable  instrument  drawn 
upon  or  payable  at  any  other  bank,  located  in  another  city  or  town,  whether 
within  or  without  this  State,  may  forward  such  instrument  for  collection 
directly  to  the  bank  on  which  it  is  drawn  or  at  which  it  is  made  payable, 
and  such  method  of  forwarding  direct  to  the  payor  shall  be  deemed  due 
diligence,  and  the  failure  of  any  such  payor  bank,  because  of  its  insolvency 
or  other  default,  to  account  for  the  proceeds  thereof,  shall  not  render  the 
forwarding  bank  liable  therefor ;  provided,  however,  such  forwarding 
bank  shall  have  used  due  diligence  in  other  respects  in  connection  with  the 
collection  of  such  instrument." 


Correspondent  Bank  Liable  to  Forwarding  Bank  for  Delay  in 
Tracing  and  Reporting  on  Items  Sent  It  for  Collection. 

A  bank  sends  to  its  correspondent  for  collection  and  credit  a  number  of 
checks  drawn  on  different  localities.  These  items  are  properly  credited, 
and  the  forwarding  bank  so  notified.  After  a  year  elapses  the  correspond- 
ent bank  advises  the  forwarding  bank  of  the  loss  of  one  of  the  checks,  and 
requests  duplicate.  Duplicate  can  not  be  secured,  and  the  correspondent 
bank  then  notifies  the  forwarding  bank  that  it  will  charge  the  amount  of 
the  check  to  its  account.  Has  it  the  right  to  make  such  a  charge  ? 

A  bank  which  acts  as  collecting  agent  for  another  bank  must 
use  reasonable  diligence  and  care,  and  if  in  consequence  of  a  fail- 
ure to  do  so  a  loss  occurs,  it  is  liable.  This  is  the  well-recognized 
and  established  rule.  Quoting  from  Morse  on  Banks  and  Bank- 
ing, §  252 : 

"If  a  bank  fails  to  do  its  duty  in  the  matter  of  collection  with 
reasonable  skill  and  care,  it  is  liable  for  the  damage  resulting  to 
any  party  interested  in  the  paper,  whether  his  name  appears  on 
the  paper  or  not." 

Reasonable  diligence  requires  that  a  bank  undertaking  collec- 
tion of  checks  must  ascertain  within  a  reasonable  time 
whether  checks  are  paid,  and,  if  not,  advise  the  customer 
from  whom  the  check  was  received  to  that  effect,  and  a  delay  in 
making  such  inquiry  and  failure  to  notify  the  party  interested 
imposes  a  liability  if  loss  is  thereby  occasioned.  In  one  case  it 
was  held  that  a  delay  of  fifteen  or  sixteen  days  in  making  inquiry 
and  giving  notice  was  inexcusable,  and  that  the  bank  was  liable. 
First  National  Bank  of  Trinidad  v.  First  National  Bank  of 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  307 

Denver,  Fed.  Cases,  No.  4810.  In  another  case  a  delay  of  twelve 
days  in  discovering  the  loss  and  of  fourteen  days  in  notifying  the 
forwarding  bank  was  held  sufficient  to  charge  the  collecting  bank 
with  negligence  and  to  render  it  liable,  a  loss  having  resulted. 
Shipsey  v.  Bowery  National  Bank,  59  N.  Y.  485.  Both  of  these 
cases  are  cited  with  approval  by  Mr.  Morse  in  the  section  referred 
to  above. 

Of  course,  if  the  loss  of  the  check  resulted  from  the  negligence 
of  the  correspondent  bank  itself,  it  would  undoubtedly  be  liable 
for  any  damage  which  might  be  occasioned  thereby,  and  under  the 
authorities  above  cited,  if  the  loss  occurred  in  the  mails  or  entirely 
without  the  fault  of  the  correspondent  bank  or  its  agents,  it  would 
still  be  liable  for  its  failure  to  follow  up  the  check,  ascertain  the 
loss,  and  report  to  the  forwarding  bank.  The  correspondent  bank, 
therefore,  would  not  be  authorized  to  charge  to  the  account  of  the 
forwarding  bank  the  amount  of  the  check,  for  the  loss  of  which  it 
was  responsible. 


Bank  May  Require  Identification  of  Party  Indorsing  Name 
of  Payee,  Although  One  of  Its  Regular  Customers,  Upon 
Check  Forwarded  Through  Another  Bank,  and  Is  Not 
Liable  for  Loss  Resulting  from  Delay  Caused  Thereby. 

A  bank  issued  a  cashier's  check  to  a  regular  customer,  which  was  sub- 
sequently forwarded  to  it  by  another  bank  with  this  indorsement :  "For 
collection.  Pay  on  signature  only.  Party  is  stranger  to.  us."  The  bank 
issuing  this  check  had  the  customer's  signature  on  file,  but  was  not  en- 
tirely sure  the  indorsement  was  genuine.  If  such  bank  paid  the  check, 
could  it  hold  the  forwarding  bank  liable  in  the  event  the  indorsement 
proved  to  be  a  forgery?  Could  the  bank  issuing  the  check  decline  payment 
until  the  customer  was  properly  identified  and  be  relieved  of  liability  to 
him  for  any  loss  resulting  from  the  delay  caused  thereby? 

I  do  not  think  the  bank  forwarding  the  check  could  be  held 
liable.  It  did  not  cash  the  check,  but  simply  sent  it  to  the  bank 
issuing  it  for  collection,  putting  such  bank  on  notice,  by  its  in- 
dorsement on  the  check  that  it  did  not  cash  it  and  did  not  under- 
take to  guarantee  the  genuineness  of  the  signature.  Where  a 
bank  cashes  a  check  drawn  on  another  bank,  it  is  supposed  to  have 
the  party  to  whom  it  pays  the  money  properly  identified  before 
making  payment,  and  when  it  indorses  the  check  it  guarantees  all 
prior  indorsements.  But  in  this  case  the  check  does  not  seem 
to  have  been  cashed,  but  simply  accepted  for  collection  and  for- 
warded with  the  information  that  it  had  not  been  cashed  and  that 
the  forwarding  bank  was  undertaking  simply  to  collect  for  a  party 


308  PARK'S  BANKING  LAW  OF  GEORGIA. 

whose  signature  it  could  not  vouch  for  and  for  the  genuineness  of 
which  it  assumed  no  responsibility. 

A  bank  is  expected  to  know  its  depositors'  signatures  and  to  take 
the  risk  of  paying  on  forged  signatures.  This  applies,  however, 
to  signatures  on  the  customers'  checks  rather  than  to  their  signa- 
tures on  other  papers.  I  do  not  think  there  would  be  any  burden 
on  a  bank  to  know  the  indorsement  of  a  party,  although  he  might 
happen  to  have  a  deposit  account  with  it  and  his  genuine  signa- 
ture might  be  on  file.  This  signature  would. generally  afford  the 
means  of  determining  whether  or  not  an  indorsement  was  genu- 
ine, but  if  the  bank  were  doubtful  about  the  signature  I  think  it 
would  be  justified  in  holding  the  check  until  the  genuineness  of 
the  indorsement  could  be  established.  And  if  there  was  any 
reason  to  doubt  the  genuineness  of  the  signature,  and  the  bank 
held  the  check  in  order  that  the  signature  might  be  properly 
identified  or  its  genuineness  established,  I  do  not  think  it  would 
be  liable  for  damages  occasioned  by  this  delay,  assuming,  of 
course,  that  it  exercised  reasonable  diligence  to  secure  the  identi- 
fication promptly. 


CONDITIONAL  BILL  OF  SALE. 


Conditional  Bill  of  Sale  Retaining  Title  to  Personalty  Cannot 
Be  Treated  as  a  Mortgage  or  Foreclosed  as  Such. 

A  conditional  bill  of  sale  retaining  title  to  personal  property  sold,  also 
contains  a  provision  authorizing  the  vendor  to  treat  the  instrument  as  a 
mortgage  and  to  foreclose  the  same  in  the  way  that  chattel  mortgages  are 
foreclosed.  Is  this  option  in  the  instrument  valid  and  enforceable? 

It  is  not,  the  Supreme  Court  of  Georgia  has  decided : 

"Where  sellers  of  personal  property  took  from  the  buyer  a  written 
instrument'promising  to  pay  the  unpaid  purchase  money  and  agreeing 
that  the  title  to  the  property  should  remain  in  the  sellers  until  pay- 
ment in  full,  and  in  the  instrument  was  inserted  an  agreement  by 
the  buyer,  that  upon  default  in  payment  the  sellers  might,  'in  ad- 
dition to  any  other  remedies  provided  by  law  for  the  enforcement 
of  the  collection  hereof,  at  their  option  elect  to  treat  this  instru- 
ment as  a  mortgage  upon  the  property  title  to  which  is  retained 
by  the  said  (sellers)  by  the  terms  hereof,  and  upon  the  execution 
of  a  bill  of  sale  to  the  maker  or  makers  hereof  to  such  property, 
and  the  filing  and  recording  of  such  bill  of  sale  in  the  office  of  the 
clerk  of  the  Superior  Court  *  *  *  shall  give  the  right  to 
the  said  (sellers)  to  proceed  to  foreclose  this  instrument  as  a 
mortgage  upon  said  property,  together  with  the  other  property 


OPINIONS  OF  THE  GENERAL  COUNSEL.  309 

herein  mortgaged,  in  the  same  manner  as  mortgages  upon  per- 
sonal property  are  foreclosed  under  the  laws  of  this  State/  the 
parties  could  not  by  such  an  agreement  make  the  instrument  one 
both  retaining  title  and  not  retaining  title;  nor  could  they  by 
such  agreement  make  a  summary  statutory  proceeding  applicable 
by  law  to  one  character  of  instruments  applicable  by  agreement  to 
another."  Wynn  &  Robinson  v.  Tyner,  139  Ga.  765  (2). 

It  should  be  remembered  that  bills  of  sale  to  secure  debt,  where 
the  amount  secured  is  less  than  $100,  can  be  foreclosed  as  chattel 
mortgages  under  the  statute.  Park's  Ann.  Code,  §  3298. 


CONFEDERATE  MONEY. 


Passing  Not  in  Violation  of  United  States  'Statutes. 

What  is  the  penalty  for  passing  or  attempting  to  pass  Confederate 
money  ? 

In  answer  to  this  question  I  quote  first  from  a  case  decided 
some  little  time  ago  by  a  Federal  court  sitting  in  North  Dakota: 

"The  passage  of  a  Confederate!  bill  as  money  is  not  a  violation 
of  the  fourth  clause  of  Rev.  St.  §  5430,  which  makes  it  an  offense 
for  any  person,  except  under  authority  of  a  proper  officer,  to  have 
in  his  possession  'any  obligation  or  other  security  engraved  and 
printed  after  the  similitude  of  any  obligation  or  other  security 
issued  under  the  authority  of  the  United  States,  with  intent  to 
sell  or  otherwise  use  the  same;'  but,  to  constitute  a  violation  of 
such  provision,  the  instrument  used  must  in  its  inception  have 
been  intended  to  simulate  some  obligation  or  security  of  the 
United  States.  The  general  likeness  which  one  form  of  paper 
money  bears  to  another  is  not  sufficient."  United  States  v.  Bar- 
rett, 111  Fed.  369  (1). 

In  another  case  it  was  held : 

"An  ordinary  Confederate  States  five  dollar  note  does  not  bear 
to  the  national  currency  the  'similitude'  contemplated  in  Rev. 
St.,  §  5430,  notwithstanding  such  notes  are  frequently  ac- 
cepted by  mistake  as  money."  United  States  v.  Kuhl,  85  Fed. 
624  (D.  C.  Iowa). 

In  the  case  last  cited  it  was  held  also  that  a  Confederate  bill 
might,  if  it  bore  a  marked  similarity  to  national  currency,  violate 
the  statute  of  the  United  States,  but  that  the  ordinary  Confed- 
erate note  did  not  bear  such  similarity. 

While  it  would  not  be  a  violation  of  the  statute  of  the  United 
State  ordinarily  to  pass  a  Confederate  bill,  such  money  might  be 


310  PARK'S  BANKING  LAW  OF  GEORGIA. 

used  to  perpetrate  a  fraud,  and  might  be  punished  under  our 
statute  against  cheating  and  swindling,  the  statute  being  broad 
enough  in  its  terms  to  cover  any  means  or  device  by  which  one 
person  defrauds,  cheats,  or  swindles  another.  Passing  such 
money  on  a  very  ignorant  person  who  could  not  read  and  who, 
therefore,  would  not  be  able  to  tell  that  the  bill  offered  was  a 
Confederate  bill,  or  on  a  blind  person,  would  be  such  a  fraud. 
The  fact  that  the  bill  was  a  Confederate  bill  would  make  no 
difference.  Passing  any  kind  of  paper  on  another  person  as 
money  would  be  the  same  thing. 


CORPORATE  STOCK. 


Transfer  of  Not  Affected  by  Judgments  Against  Vendor. 

Was  not  a  law  recently  passed  making  corporate  stock  negotiable?  Is 
it  necessary  in  lending  upon  stock  to  examine  the  records  to  see  whether 
there  are  judgments  against  the  parties  owning  the  stock? 

I  know  of  no  recent  act  on  the  subject.  The  last  statute  was 
passed  in  1894  and  is  found  in  §  6036,  Park's  Ann.  Code.  Under 
this  statute  corporate  stock  is  of  a  quasi  negotiable  character.  After 
being  indorsed  in  blank  it  may  be  transferred  freely  from  hand 
to  hand  practically  as  a  negotiable  instrument,  and  the  purchaser 
or  pledgee  can  hold  regardless  of  a  judgment  against  the  original 
owner,  although  that  judgment  may  have  been  entered  prior  to 
the  transfer. 

The  following  quotation  is  from  the  case  of  Owens  v.  Atlanta 
Trust  and  Banking  Company,  122  Ga.  521,  523 : 

"Stock  in  a  corporation  is  a  chose  in  action.  In  the  absence  of 
a  statute  it  would  not  be  subject  to  levy  or  sale.  By  the  Act  of 
1822,  the  lien  of  a  judgment  against  the  shareholder  attached 
from  the  date  of  its  rendition,  but  had  to  be  kept  alive  by  giving 
notice  within  twenty  days  to  the  corporation.  This  policy  is  re- 
versed by  the  Civil  Code,  §  6035.  The  lien  now  does  not  attach 
to  the  stock  upon  the  rendition  of  the  judgment,  but  only  after 
notice  acting  as  a  sort  of  garnishment  on  the  corporation,  or 
withholding  the  lien  until  levy  as  under  the  Civil  Code,  §  3701. 
Until  this  notice  is  received  the  statute  recognizes  that  the  com- 
pany may  make  transfers  notwithstanding  the  existence  of  a 
judgment  against  the  shareholder.  The  quasi  negotiable  char- 
acter of  stock,  the  fact  that  certificates  indorsed  in  blank  may  and 
dp  pass  from  hand  to  hand,  and  the  necessity  of  preserving  the 
rights  of  that  large  body  of  the  public  who  buy  and  lend  on 


OPINIONS  OF  THE  GENERAL  COUNSEL.  311 

the  faith  of  shares,  was  no  doubt  the  reason  for  the  change  made 
by  the  Code  in  the  Act  of  1822." 

Under  this  decision,  it  would  not  be  necessary  for  a  bank  to 
examine  the  execution  dockets  to  determine  whether  judgments 
had  been  rendered  against  the  pledger  of  stock. 


Corporate  Stock  When  Transferred  as-  Collateral  Should  Be 
Accompanied  by  Power  of  Attorney. 

Where  corporate  stock  is  transferred  as  collateral  is  a  simple  indorse- 
ment of  the  stock  sufficient,  or  is  it  necessary  that  a  power  of  attorney, 
such  as  is  usually  printed  on  the  back  of  a  stock  certificate,  should  be 
signed? 

A  power  of  attorney  should  be  given.  This  power  can  be  left 
in  blank,  however,  having  only  the  signature  of  the  stockholder, 
which  should  be  witnessed.  It  is  not  necessary  that  the  power 
of  attorney  on  the  back  of  the  certificate  should  be  signed.  A 
separate  power  of  attorney  can  be  given  and  attached  or  filed 
away  with  the  certificate.  There  is  usually,  however,  no  reason 
why  the  regular  form  of  power  of  attorney  on  the  back  of  the 
certificate  should  not  be  used. 


COUNTY  LOANS. 


County  Authorities  Have  No  Power  to  Borrow  Money  for 
Current  Expenses. 

Can  county  commissioners  lawfully  borrow  a  sum  of  money  on  their 
note  payable  December  31  of  the  current  year,  the  transaction  being  for 
the  purpose  of  raising  money  to  cover  running  expenses  of  the  county  for 
the  year  and  also  old  debts  ? 

The  precise  question  has  been  decided  by  the  Supreme  Court, 
the  Court  having  held  distinctly  that  the  county  commissioners 
have  no  such  authority.  I  quote  from  the  case  of  Butts  County  v. 
Jackson  Banking  Company,  129  Ga.  801 : 

"County  commissioners  have  no  authority  to  contract  in  behalf 
of  a  county  for  a  loan  of  money  (not  to  supply  a  casual  deficiency 
of  revenue)  to  be  used  in  defraying  current  expenses,  although 
the  notes  which  evidence  the  loan  be  payable  within  the  current 
year,  and  the  general  design  be  to  discharge  them  from  the  antici- 
pated revenue  of  that  year." 


312  PARK'S  BANKING  LA"W  OF  GEORGIA. 

In  discussing  what  are  "casual  deficiencies  of  revenue"  for 
which  a  county  may  borrow  money  without  the  approval  of  the 
qualified  voters  at  an  election  regularly  held  for  the  purpose,  the 
court  in  Lewis  v.  Lofley,  92  Ga.  804,  says : 

"The  word  'casual'  means  that  which  happens  by  accident  or  is 
brought  about  by  an  unknown  cause ;  and  we  think  the  f ramers 
of  the  Constitution,  in  using  this  language,  meant  some  unfore- 
seen or  unexpected  deficiency,  or  an  insufficiency  of  funds  to  meet 
some  unforeseen  and  necessary  expense." 

In  the  case  of  Hall  v.  Greene  County,  119  Ga.  253,  the  court 
held  that  loans  made  to  pay  court  and  jail  expenses,  expenses 
of  working  a  chain-gang  on  public  roads,  and  other  current  ex- 
penses, the  money  having  been  borrowed  to  be  repaid  within  the 
year  from  the  taxes  of  that  year,  were  unauthorized.  Quoting 
from  the  opinion : 

"There  is  no  authority  whatever  in  our  law  authorizing  county 
authorities  to  make  any  such  loans  as  the  one  disclosed  by  this 
record." 

The  paragraph  of  the  Constitution  covering  the  subject  was  di- 
rectly under  consideration  by  the  court  in  the  cases  above  cited. 
The  paragraph  provides  in  terms  that  no  new  debt  shall  be  in- 
curred, except  for  temporary  loans  to  supply  casual  deficiencies  of 
revenue,  without  the  assent  of  two-thirds  of  the  qualified  voters 
at  an  election  held  for  the  purpose.  The  same  paragraph  ap- 
plies to  municipal  corporations.  In  construing  this  section,  in  a 
case  brought  against  a  municipal  corporation,  the  court  in  Tate  v. 
Elberton,  136  Ga.  302  (3),  says: 

"This  does  not  authorize  municipal  authorities  to  borrow  money 
(not  to  supply  casual  deficiencies  of  revenue)  for  the  purpose  of 
using  it  during  the  year  in  defraying  current  expenses  as  occasion 
may  arise,  and  to  give  notes  therefor." 


COUNTY  WARRANTS. 

Order  of  Payment. 

In  what  order  must  a  county  treasurer  pay  warrants  issued  by  the  county 
commissioners? 

The  method  of  handling  county  warrants  is  prescribed  by  § 
579  Park's  Ann.  Code,  which  I  quote : 

"When  there  are  funds  enough  to  pay  all  outstanding  orders 
and  other  forms  of  indebtedness  due,  which  the  treasurer  may  be 


OPINIONS  of  THE  GENERAL  COUNSEL.  313 

authorized  to  pay,  they  may  be  paid  indiscriminately  without  re- 
gard to  their  dates;  when  there  is  enough  to  pay  all  dated  an- 
terior to  some  particular  dates,  all  such  may  be  likewise  paid  in- 
discriminately ;  when  there  is  not  enough  to  pay  all  of  equal 
degree,  they  shall  be  paid  ratably ;  under  all  other  circumstances, 
they  shall  be  paid  in  the  order  of  their  dates." 

I  quote  also  §§  581  and  582  in  reference  to  orders  carried  over 
from  one  year  to  the  next  : 

"If  any  person  holding  county  orders  shall  fail  to  present  them 
by  the  first  day  of  December  of  each  year  to  the  county  treasurer 
for  payment,  they  shall  be  postponed  to  all  orders  which  were  so 
presented  and  not  paid  for  want  of  funds." 

"On  the  first  day  of  December  of  each  year  such  treasurer 
shall  make  an  entry  of  all  orders  entitled  to  payment  which  were 
not  so  presented  for  payment,  and  what  orders  not  of  equal  dig- 
nity have  been  paid  instead,  in  whole  or  in  part,  and  what  others 
are  entitled  to  payment  before  such  nonpresented  orders.  Persons 
holding  such  orders,  who  present  them  without  receiving  their  pay 
before  said  day,  may  have  the  treasurer  annually  to  mark  thereon 
'presented/  the  day  of  presentation,  and  'not  paid  for  want  of 
funds.'  " 

These  three  sections  of  the  Code  fully  answer  the  question. 


Warrants  Do  Not  Bear  Interest? 

Do  county  warrants  bear  interest? 

No.  The  question  has  been  expressly  decided  in  the  case  of 
the  First  National  Bank  v.  Owens.  147  Ga.  599 

Rule  changed,  7  per  cent  inter- 
est  provided.     Act  1 920,  page  65 

School  Warrants  to  Pay  Teachers'  Salaries  Are  Valid. 

Are  school  warrants  issued  by  county  boards  of  education  valid? 

These  warrants  are  issued  under  authority  of  an  act  of  the 
legislature  passed  in  1910,  Park's  Ann.  Code,  §  1548  (a),  which 
gives  to  the  county  boards  of  education  of  the  several  counties  the 
authority  to  borrow  a  sufficient  amount  of  money  to  pay  the  sal- 
aries of  teachers  in  the  public  schools  of  their  counties  for  the 
current  school  year,  the  authority  being  limited  to  the  amount 
to  which  the  county  may  be  entitled  from  the  public  school  fund. 
In  order  to  be  valid,  these  warrants  must  be  authorized  by  a  reso- 
lution of  the  board  of  education  entered  upon  its  minutes,  the 
resolution  stating  the  amount  of  money  to  be  borrowed,  the  length 


314  PARK'S  BANKING  LAW  OF  GEORGIA. 

of  time,  the  rate  of  interest,  the  purpose  of  the  loan  and  the  name 
of  the  lender.  The  notes  must  be  signed  by  the  president  of 
the  board  of  education  and  the  county  school  commissioner.  If 
the  warrants  are  drawn  in  accordance  with  the  statute,  the  loans 
are  valid  and  collectible. 


Whether  Warrants  May  Be  Applied  to  Payment  of  Taxes  Not 

Decided. 

Would  county  authorities  be  obliged  to  receive  in  payment  of  taxes 
county  warrants  given  for  labor  and  merchandise? 

Apparently  the  question  has  not  been  decided  by  the  courts  in 
Georgia.  The  Cyclopedia  of  Law  and  Procedure,  Volume  XI, 
p.  542,  says : 

"County  warrants  have  been  held  to  be  receivable  in  discharge 
of  county  or  city  revenue,  license,  tax,  assessment,  fine,  penalty, 
or  forfeiture,  etc." 

The  cases  cited  in  support  of  the  text,  however,  seem  all  to 
depend  on  the  statutes  of  the  particular  States.  In  a  number  of 
States  it  is  expressly  provided  that  county  warrants  shall  be  re- 
ceivable for  taxes  and  other  governmental  charges.  I  believe 
that  every  case  cited  in  support  of  the  text  depends  on  one  of 
these  special  statutes.  Therefore,  they  are  without  any  real 
bearing  on  the  question. 

I  doubt  very  much  whether,  except  where  provided  by  statute, 
a  county  warrant  may  be  offset  against  a  claim  for  taxes.  These 
warrants  are  not  notes  or  obligations  of  the  county,  but  are  simply 
orders  of  the  ordinary  or  commissioners  of  the  county  on  the 
treasurer,  and  are  given  primarily  to  advise  the  treasurer  that  the 
account  of  the  holder  of  the  order  has  been  properly  authorized, 
audited  and  allowed,  and,  therefore,  that  the  treasurer  is  au- 
thorized to  pay  it.  The  orders  are  not  payable  at  any  fixed  time, 
it  being  contemplated  that  they  shall  be  paid  on  presentation, 
provided  the  treasurer  has  funds,  and  if  not  he  is  to  note  the  fact 
on  the  warrant;  and  such  warrants  as  are  not  presented  by  the 
first  of  December  are  postponed  to  those  which  are  so  presented. 

There  is  nothing  in  the  statute  authorizing  these  warrants  or 
orders  to  be  given  to  indicate  that  it  was  contemplated  that  they 
should  be  used  in  the  payment  of  claims  again,st  the  county  or 
were  themselves  to  be  regarded  as  the  obligations  of  the  county. 
As  stated,  they  seem  to  be  mere  evidence  for  the  benefit  of  the 


OPINIONS  OF  THE  GENERAL  COUNSEL.  315 

treasurer  that  the  accounts  which  they  represent  are  proper 
claims  against  the  county,  and  they  are  his  authority  for  making 
payment  thereof. 

It  should  be  remembered,  too,  that  the  tax  collector  collects  not 
only  the  county  tax,  but  also  the  State  tax.  It  would  hardly  do  to 
say  that  a  county  warrant  could  be  used  to  pay  the  State  tax,  and 
I  fear  if  they  were  used  to  pay  the  county  tax,  separate  and 
apart  from  the  State  tax,  considerable  confusion  might  arise  in 
the  handling  of  the  county  affairs.  Such  use  of  them  would 
probably  permit  one  debtor  of  the  county  to  receive  payment 
of  his  claim  in  preference  and  priority  to  other  creditors  holding 
claims  of  equal  dignity. 

But  as  above  stated,  the  question  does  not  seem  to  have  been  de- 
cided in  Georgia,  and  there  is  no  way  to  tell  just  what  the  courts 
would  hold  in  the  event  the  question  were  raised.  There  would 
be  very  good  argument  for  the  position  that  the  taxpayer  to  whom 
the  county  was  indebted  should  not  be  required  to  pay  his  tax  and 
wait  on  the  county  to  meet  its  obligation  to  him,  but  that  the  one 
claim  should  be  offset  against  the  other. 


CREDIT  STATEMENTS. 


Advantages  of. 

What  is  the  advantage  to  a  bank  in  securing  credit  statements  from  its 
customers? 

I  am  a  great  believer  in  a  bank  securing  statements  to  be  used 
as  a  basis  for  fixing  lines  of  credit.  Such  statements  give  in- 
formation in  a  permanent  form,  which  could  hardly  be  obtained 
by  conversation  with  the  customer.  And  even  if  the  customer  in 
conversation  gave  the  bank  essentially  the  same  facts  as  he  put 
in  the  statement,  he  would  perhaps  not  be  so  accurate  in  these 
verbal  statements  as  he  would  be  if  required  to  reduce  the  state- 
ments to  writing.  Then,  too,  in  the  absence  of  a  written  state- 
ment, it  would  be  simply  a  question  of  recollection  between  the 
bank  and  the  customer  as  to  what  the  customer  actually  said; 
whereas,  if  the  bank  has  it  in  writing  over  the  customer's  own 
signature,  there  can  be  no  doubt  as  to  what  his  statement  was. 

Another  advantage  in  securing  credit  statements  is  the  fact  that 
obtaining  credit  on  the  strength  of  a  written  statement,  which  is 


316  PARK'S  BANKING  LAW  OF  GEORGIA. 

materially  false,  could  be  made  the  basis  of  a  criminal  prosecution, 
or  to  defeat  a  discharge  in  bankruptcy. 

Such  a  statement  should  show  not  only  the  customer's  assets 
and  liabilities  in  detail,  but  all  other  facts  in  connection  with  his 
business,  as,  for  instance,  the  volume  of  business  done,  the  amount 
of  cash  and  credit  sales,  the  expenses,  margin  of  profit,  and  any 
and  all  other  matters  which  would  enable  the  banker  to  determine 
whether  or  not  the  business  being  conducted  is  a  profitable  one 
or  one  likely  to  succeed.  Where  the  business  is  that  of  a  partner- 
ship or  a  small  private  corporation,  statements  as  to  the  indi- 
vidual assets  and  liabilities  of  the  partners  or  officers  of  the  cor- 
poration should  also  be  required.  In  giving  the  liabilities  the 
customer  should  be  required  to  show  what  these  Habilites  repre- 
sent, whether  for  the  purchase  of  merchandise,  borrowed  money, 
or  outside  indebtedness  of  any  sort,  how  much  of  this  indebted- 
ness is  due,  whether  any  of  it  is  secured,  and  how.  Similar  de- 
tail information  as  to  assets  should  be  required.  With  such  a 
statement  as  this,  the  banker  may  intelligently  fix  a  line  of  credit. 
He  may  also  in  many  cases  be  of  material  benefit  to  the  customer, 
pointing  out  to  him  wherein  his  business  is  not  being  properly  con- 
ducted or  wherein  its  weakness  lies,  getting  him  to  cut  off  this  or 
that  expense,  to  get  this  indebtedness  shaped  up  and  carried  in 
better  form. 

Where  such  statements  are  kept  from  year  to  year,  a  com- 
parison of  the  statements  will  enable  the  banker  to  determine 
whether  the  business  is  making  any  headway,  and  whether  or 
not  the  demands  and  requirements  of  the  customer  are  proper  or 
necessary  for  the  conduct  of  the  business.  A  bank  frequently 
does  a  customer  injustice  by  giving  him  a  too  liberal  line  of 
credit,  and  many  a  failure,  resulting  not  only  in  disaster  to  the 
customer  but  loss  to  the  bank,  would  be  avoided  by  keeping  the 
customer  within  proper  limits.  This  can  best  be  done  by  a  careful 
study  of  his  business  needs  and  requirements,  which  can  only  be 
made  from  carefully  compiled  information  in  regard  to  the  finan- 
cial condition  of  the  business.  One  of  the  great  troubles  with 
many  business  houses  is  that  they  do  not  know  their  own  con- 
dition, and  so  long  as  they  can  get  credit  from  the  bank  they 
continue  to  do  business,  frequently  getting  deeper  and  deeper  in 
debt,  and  finally  fail,  generally  subjecting  the  bank  to  considerable 
loss,  when,  if  they  had  known  what  the  true  condition  was  and 
had  their  line  of  credit  limited  to  real  requirements,  they  would 
probably  have  been  successful. 


OPINIONS  OE  THE;  GENERAL  COUNSEL.  317 

CROP  MORTGAGES. 


Mortgage  on  Crop  for  Supplies  Superior  to  Older  Judgment. 
How  Crop  Subject  to  Both  Should  Be  Handled. 

It  being  provided  in  §  3349  of  the  Code  that  mortgages  given  to  secure 
advances  for  supplies  in  making  a  crop  are  superior  to  judgments,  although 
of  older  date,  how  can  a  crop,  which  is  subject  to  such  mortgage  and  also 
to  judgments,  be  safely  marketed? 

The  effect  of  this  section  is  simply  to  postpone  judgment  liens 
to  the  liens  of  mortgages  for  supplies.  The  section  does  not  di- 
vest the  judgment  liens,  but  leaves  the  crop  subject  to  them  in 
the  same  way  and  to  the  same  extent  as  it  was  before,  merely 
postponing  the  judgment  to  the  mortgage.  The  situation  is  pre- 
cisely the  same  as  though  after  the  mortgage  was  given  a  judg- 
ment should  be  obtained  against  the  mortgagor  and  properly  re- 
corded. 

A  mortgage  is  only  a  lien  upon  the  property  covered  thereby, 
and  does  not  convey  title.  A  judgment  is  also  a  lien.  The  Su- 
preme Court  has  held  that  a  judgment  lien  can  not  be  divested 
by  a  subsequent  conveyance  of  property,  although  such  convey- 
ance is  made  in  satisfaction  of  a  prior  mortgage  lien.  I  quote 
from  the  case  of  Maclntyre  v,  Ferst's  Sons  &  Company,  101  Ga. 
682: 

"Where  a  creditor  whose  debt  is  secured  by  mortgage,  in  satis- 
faction of  such  debt,  takes  a  conveyance  of  the  property  mort- 
gaged, such  conveyance  is  not  effectual  to  vest  in  him  a  title  which 
would  prevail  upon  the  trial  of  a  claim  afterwards  filed  by  such 
creditor  to  prevent  the  sale  of  such  property  under  an  execution 
issued  upon  a  judgment  junior  to  the  mortgage  but  older  than  the 
deed." 

It  will  be  seen  from  this  decision,  therefore,  that  where  there 
are  judgments  against  the  mortgagor  of  a  crop,  the  holder  of  the 
mortgage  can  not  take  the  crop  and  apply  it  in  satisfaction  of  his 
debt,  so  as  to  defeat  the  judgment,  although  his  lien  may  be  su- 
perior to  the  lien  of  the  judgment.  The  only  way  that  a  judgment 
lien  can  be  divested  would  be  by  a  foreclosure  of  the  mortgage 
and  a  sale  of  the  property.  As  the  cotton  would  be  subject,  both 
to  the  lien  of  the  mortgage  for  supplies  and  also  to  a  duly  re- 
corded judgment,  it  could  not  be  pledged  either  directly  or  by  the 
hypothecation  of  a  warehouse  receipt,  so  as  to  defeat  the  lien 
either  of  the  mortgage  or  the  judgment,  and,  of  course,  it  could 
not  be  sold  so  as  to  defeat  either  lien. 


318  PARK'S  BANKING  LAW  OF  GEORGIA. 

It  is  probably  well  to  remember  that  §  3349  only  makes  superior 
to  older  judgments  a  technical  mortgage,  and  it  has  been  held  that 
a  bill  of  sale  given  to  secure  a  debt,  although  the  debt  is  for  sup- 
plies furnished  to  make  a  crop,  is  not  superior  to  older  judgments. 
I  quote  from  a  decision  by  the  Court  of  Appeals : 

"The  lien  of  a  judgment  duly  recorded  on  the  general  execu- 
tion docket  is,  after  the  maturity  of  a  growing  crop  of  the  de- 
fendant in  fi.  fa.,  superior  to  the  title  thereto  obtained  through 
a  bill  of  sale  to  secure  a  debt,  executed  by  the  defendant  in  fi.  fa. 
to  a  third  person  after  the  judgment  is  recorded,  but  before  the 
crop  is  mature. 

The  Act  of  December  21, 1899  (Park's  Ann.  Code,  §  3349)  pro- 
viding that  mortgages  given  to  secure  supplies  necessary  to  make 
a  crop  shall  be  superior  to  older  judgments,  does  not  include 
within  its  purview  bills  of  sale  given  to  secure  such  supplies." 
Hixon  v.  Callaway,  2  App.  678. 


Crop  Mortgages  Must  Be  Attested  as  Mortgages  on  Real 

Estate. 

Does  a  crop  mortgage  in  Georgia  require  two  witnesses,  one  of  whom 
must  be  a  duly  authorized  officer? 

My  information  is  that  crop  mortgages  in  Georgia  are  ordina- 
rily attested  as  are  chattel  mortgages,  crops  being  popularly  con- 
sidered as  personal  rather  than  as  real  property.  The  legal  status 
of  a  growing  crop  has  given  rise  to  much  uncertainty  and  con- 
tradiction in  the  law.  The  decisions  are  spoken  of  by  Chief  Jus- 
tice Simmons  as  constituting  a  "mystic  maze."  The  Chief  Jus- 
tice says : 

"We  are  free  to  confess,  about  the  only  deduction  we  have  been 
able  to  draw  therefrom  is  that  a  growing  crop  is  a  sort  of  legal 
species  of  chameleon,  constantly  changing  color  to  meet  the 
emergency  of  each  particular  class  of  cases  in  which  the  question 
arises  whether  it  is  to  be  considered  as  personalty  or  as  realty." 
Bagley  v.  Columbus  Southern  Railway  Company,  98  Ga.  626. 

In  this  case,  which  involved  the  sum  of  $6.00,  it  required  an 
opinion  of  twenty  printed  pages  for  the  Supreme  Court  to  reach 
the  conclusion  which  it  finally  did,  that  a  crop  in  Georgia  is  a  part 
of  the  land  upon  which  it  is  growing,  and  is  not  personal  property. 
This  decision  has  been  several  times  followed  by  the  Supreme 
Court  and  the  Court  of  Appeals. 

The  last  reported  case,  decided  February  13,  1919,  is  that  of 
Newton  County  v.  Boyd,  98  S.  E.  347,  in  which  it  is  said : 


OPINIONS  OF  THE  GENERAL  COUNSEL.  319 

"A  crop  of  corn  not  detached  from  the  soil,  whether  mature 
or  immature,  is  a  part  of  the  realty  and  passes,  by  sale  of  the  land, 
without  contractual  reservation  of  the  crop." 

A  corp  under  these  decisions  being  a  part  of  the  land  is  re- 
garded as  real  property  and  not  as  personal  property.  Under  the 
Code,  a  mortgage  of  land,  or  any  interest  therein,  must  be  at- 
tested by  two  witnesses,  one  of  them  being  an  officer.  Crop  mort- 
gages must,  therefore,  be  attested  like  any  other  mortgages  of 
real  estate,  though,  as  above  stated,  it  has  not  been  customary  in 
Georgia  to  so  attest  them. 


Crop  must  Be  Up  and  Growing  Before  It  Can  Be  Mortgaged. 

What  is  the  advantage  of  waiting  until  May  ist  to  take  a  crop  mortgage? 
Should  such  a  mortgage  be  recorded? 

A  crop  cannot  be  mortgaged  until  it  is  up  and  growing.  It  is 
not  considered  a  crop  until  that  time,  and,  therefore,  is  not  the 
subject  of  mortgage,  the  law  requiring  that  the  property  mort- 
gaged shall  be  specifically  described  in  the  mortgage  itself.  Redd 
v.  Burrus,  58  Ga.  574. 

The  reason  for  recording  such  a  mortgage  is  to  preserve  its 
priority  over  other  mortgages  and  liens.  It  is  true  that  under 
§  3349,  Park's  Ann.  Code,  "The  liens  of  mortgages  on  crops 
which  mortgages  are  given  to  secure  the  payment  of  debts  for 
money,  supplies  and  other  articles  of  necessity,  including  live 
stock,  to  aid  in  making  and  gathering  such  crops,  shall  be  superior 
to  judgments  of  older  date  than  such  mortgages."  But  these 
mortgages  would  rank  as  between  themselves  according  to  the 
record,  unless  the  junior  mortgagee  had  notice  of  the  existence 
of  the  prior  mortgage. 


Mortgage  of  Peach  Crop. 

Can  a  valid  lien  be  created  in  the  latter  part  of  January  upon  the  year's 
peach  crop?  If  so,  what  description  should  the  mortgage  contain? 

While  the  courts  of  Georgia  seem  never  to  have  passed  upon 
the  question  as  to  whether  a  peach  crop  could  be  mortgaged  as 
early  as  the  time  indicated,  I  think  a  valid  mortgage  on  such  a 
crop  could  be  created.  Park's  Ann.  Code,  §  3256,  says  that 
a  mortgage  "may  embrace  all  property  in  possession  or  to  which 


320  PARK'S  BANKING  LAW  OF  GEORGIA. 

the  mortgagor  has  the  right  of  possession  at  the  time,"  and  under 
this  section  the  Supreme  Court  has  held  that  a  crop  planted  and 
up  and  growing  may  be  mortgaged.  I  quote  from  the  decision  in 
Stephens  v.  Tucker,  55  Ga.  543  : 

"A  mortgage  executed  in  May,  1873,  of  six  bales  of  cotton, 
growing  and  being  grown  and  produced  on  a  plantation  in  Lee 
County,  known  as  the  Jesse  Tucker  plantation,  and  cultivated 
by  the  mortgagor,  said  bales  to  average  five  hundred  pounds 
each,  to  be  covered  with  bagging  and  bound  with  iron  ties,  and 
'to  be  delivered  in  good  order  and  condition  at  the  warehouse 
of  Welch,  Bacon  &  Cook,  in  Albany,  Georgia,  on  or  before  the 
15th  of  October  next,'  is  sufficiently  specific  in  the  description 
of  the  particular  bales  mortgaged. 

"If  it  be  proved  to  the  satisfaction  of  the  jury,  that  six  bales 
of  the  crop  of  cotton  so  grown,  ginned  and  packed,  were  delivered 
at  said  warehouse,  the  cotton  will  be  sufficiently  identified  as  that 
described  in  the  mortgage,  and  will  be  subject  to  execution  issued 
thereon." 

Other  decisions  in  which  this  has  been  held  to  be  the  law  are : 
Redd  v.  Burrus,  58  Ga.  574;  Crine  v.  Tifts,  65  Ga.  644;  Kor- 
syth  Manufacturing  Co.  v.  Castlen,  112  Ga.  199;  Hall  v.  State, 
2  Ga.  App.  739.  It  appears  from  these  decisions  that  a  crop  hav- 
ing any  actual  or  potential  existence  can  be  mortgaged. 

Applying  these  decisions  to  the  case  of  a  peach  crop,  I  think  the 
peaches  could  be  mortgaged  the  latter  part  of  January.  I  am 
informed  by  peach  growers  that  at  that  time  buds  can  be  seen 
on  the  trees,  and  that  they  can  tell  with  a  reasonable  degree  of 
certainty  what  sort  of  crop  they  will  have,  provided  the  cold 
weather  does  not  kill  it.  In  view  of  this  information,  I  should  say 
that  a  peach  crop  at  the  time  indicated  certainly  has  a  potential 
existence  and  that,  therefore,  a  valid  mortgage  upon  it  can  be  cre- 
ated. 

It  is  usual  in  mortgaging  a  crop  to  describe  it  as  "So  many 
acres  of  cotton  or  so  many  acres  of  corn,"  but  I  think  under  the 
decision  in  Stephens  v.  Tucker,  above  quoted,  a  mortgage  could  be 
taken  on  five  hundred  crates  of  peaches,  the  land  on  which  the 
peaches  are  raised  being  fully  described  so  it  could  be  identified. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  321 

Advantages  of  Reciting  Purpose  for  Which  Crop  Mortgage 

Is  Given. 

Where  money  is  advanced  on  a  crop  mortgage,  is  it  of  advantage  to 
state  in  the  mortgage  that  advance  is  for  purpose  of  raising  the  crop,  and 
if  so  drawn,  will  mortgage  be  of  equal  dignity  with  landlord's  lien  for  sup- 
plies advanced  to  make  the  crop? 

It  is  best  that  a  crop  mortgage  taken  to  secure  advances  of 
money  or  other  things  needed  to  make  a  crop  should  so  state  in 
the  mortgage  itself.  This  is  not  necessary,  for  if  the  money 
was  in  fact  advanced  for  the  purpose,  it  could  be  shown,  but  this 
requires  proof.  Such  a  recital  in  the  mortgage  would  estop  the 
mortgagor,  or  any  one  claiming  through  him,  from  questioning 
the  fact  that  the  amount  was  advanced  for  the  purpose  of  making 
the  crop. 

The  lien  of  a  landlord  for  supplies  furnished  is  superior  to 
such  crop  mortgage.  See  Park's  Ann.  Code,  §  3351. 


CURRENCY. 


Stamping  Advertisement  on,  Criminal. 

Is  it  contrary  to  law  to  use  rubber  stamp  on  currency  imprinting  on  it 
in  ink  such  notations  as  "This  bank  insures  your  deposits.  Bank  of 
A"? 

Yes;  the  U.  S.  Criminal  Code,  §  177,  Rev.  St.,  §  5188,  pro- 
vides : 

"It  shall  not  be  lawful  *  *  *  to  design  *  *  *  any 
business  or  professional  card  *  *  *  in  the  likeness  or  simili- 
tude of  any  bond,  certificate  of  indebtedness,  certificate  of 
deposit,  coupon,  United  States  note,  treasury  note,  gold  cer- 
tificate, silver  certificate,  fractional  note  or  other  obligation  or 
security  of  the  United  States  which  has  been  or  may  be  issued 
under  or  authorized  by  any  Act  of  Congress  heretofore  passed, 
or  which  may  hereafter  be  passed,  or  to  write,  print  or  otherwise 
impress  upon  any  such  instrument,  obligation  or  security,  any 
business  or  professional  card,  notice  or  advertisement,  or  any  no- 
tice or  advertisement  of  any  matter  or  thing  whatever." 

The  penalty  for  violating  the  section  is  a  fine  of  not  more  than 
$500.00. 


21 


322  PARK'S  BANKING  LAW  OF  GEORGIA. 

DEPOSITS. 


Payment  of  Deceased  Depositor's  Balance  to  His  Heirs. 

Can  a  bank  safely  pay  over  to  the  heirs  at  law  of  a  deceased  depositor 
the  amount  of  his  balance,  as  well  as  the  amount  due  on  time  certificates, 
the  heirs  being  all  of  age  and  the  customer  having  left  no  debts? 

Where  the  heirs  are  all  of  age  and  are  laboring  under  no  dis- 
abilities, they  can  divide  among  themselves  an  'estate,  provided 
there  are  no  debts.  The  trouble  about  cashing  the  time  certifi- 
cates and  paying  out  the  deposits  under  such  an  arrangement  as 
this  is,  that  it  throws  upon  the  bank  the  necessity  of  determining 
whether  there  are  any  debts  and  whether  the  persons  who  make 
the  division  are  all  of  the  heirs  at  law,  and  whether  they  are  all 
legally  qualified  to  act.  Where  the  parties  are  known  and  where 
the  heirs  are  themselves  responsible,  there  is  very  little  risk.  If 
the  matter  is  to  be  handled  in  this  way,  each  one  of  the  heirs 
should  be  required  to  indorse  the  certificate  of  deposit  as  heirs 
at  law  of  the  decedent,  and  also  to  sign  the  check  for  the  amount 
of  the  deposit.  If  they  hold  a  savings  bank  pass  book,  this  should 
be  surrendered.  They  should  also  be  required  to  sign  a  written 
obligation,  reciting  that  they  are  all  of  the  heirs  at  law  of  the 
deceased ;  that  they  are  all  of  age  and  otherwise  sui  juris;  that  the 
deceased  left  no  will,  and  there  has  been  no  administration  on 
his  estate ;  that  he  left  no  debts  or  that  all  of  his  debts  have  been 
satisfied  in  full;  and  that  the  heirs  are  dividing  among  them- 
selves his  estate;  and  obligating  themselves  to  protect  and  save 
the  bank  harmless  on  account  of  the  paying  over  to  them  of  the 
deposit  and  the  cashing  of  the  certificate. 

This  method  is  frequently  adopted  where  the  amount  on  deposit 
is  small,  but  it  should  be  an  invariable  practice  where  the  amount 
is  considerable  to  require  the  taking  out  of  letters  of  administra- 
tion and  the  filing  with  the  bank  of  a  certified  copy ;  then  have 
the  money  paid  over  to  the  administrator.  Payment  to  an  ad- 
ministrator is  a  perfect  protection  to  a  bank,  and  it  is  the  only 
really  safe  way  in  which  the  account  of  a  deceased  person  can  be 
closed.  Temporary  letters  can  be  had  on  application  and  without 
any  delay,  and  the  cost  is  inconsiderable.  Usually  bond  can  be 
arranged  among  the  heirs  themselves.  I  think  it  always  much 
better  to  require  the  qualification  of  a  temporary  administrator, 
at  least,  rather  than  to  undertake  to  pay  out  any  considerable  sum 
of  money  on  the  voluntary  agreement  of  the  heirs. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  323 

NOTE. — The  Banking  Act  of  1919,  §  192,  makes  special  provision  for  the 
payment  of  deposits  of  less  than  $100.00  when  the  entire  estate  does  not 
exceed  $500.00  and  no  administration  is  had  upon  the  estate. 


Gift  of  Deposit  to  Take  Effect  at  Death  of  Donor  Can  Only 
Be  Made  by  Will. 

Can  one,  without  making  a  will,  have  the  title  to  money  deposited  by 
him  pass  to  another  at  his  death? 

A  testamentary  gift  to  take  effect  upon  the  death  of  the  giver 
can  only  be  accomplished  by  will.  A  deposit,  the  depositor  re- 
taining control  during  his  life,  could  not  pass  at  his  death  to  any 
particular  designated  person  unless  provided  for  by  will. 

NOTE. — The  Banking  Act  of  1919,  §  183,  provides  that  deposits  made  in 
the  name  of  two  persons,  payable  to  either,  may  be  paid  to  the  survivor  in 
case  of  death  of  the  other. 


On  Insolvency  of  Bank  Depositors  Share  Equally  with  Other 
Creditors  in  Distribution  of  Its  Assets. 

Do  all  creditors  of  a  bank  share  equally  in  its  assets,  or  do  the  depositors 
have  a  preferred  claim  on  the  general  assets,  or  does  the  preference  given 
to  depositors  apply  only  to  the  double  liability  of  the  stockholders? 

Depositors  rank  equally  with  other  creditors  so  far  as  the 
capital,  property  and  assets  of  a  bank  are  concerned.  They  have 
no  superior  right  to  other  creditors  save  as  to  the  stockholders' 
liability.  The  individual  liability  of  the  stockholders  under  our 
statute  is  to  depositors  only.  This  was  true  under  the  old  law, 
and  is  also  true  under  the  Banking  Act  of  1919,  §  137. 


Status  of  Depositor  Not  Changed  by  Payment  of  Interest  on 

Deposit. 

Does  a  depositor  who  is  paid  interest  on  daily  balances  rank  the  same 
as  a  depositor  not  drawing  interest? 

Payment  of  interest  does  not  change  the  character  of  a  deposit. 
Interest-bearing  deposits  and  those  that  do  not  bear  interest  are 
on  the  same  footing. 

The  Banking  Act  of  1919,  §  2,  provides  that  the  term  "de- 
positor" includes  "any  person  who  shall  deposit  money  *  *  * 
whether  interest  is  allowed  thereon  or  not." 


324  PARK'S  BANKING  LAW  OF  GEORGIA. 

Deposit  for  Special  Purpose  May  Be  Checked  Out  by  De- 
positor for  Other  Purposes. 

A  depositor  writes  on  one  of  his  deposit  slips  "to  cover  draft  of  John 
Doe  also."  The  deposit  is  larger  than  the  amount  of  the  draft.  This  de- 
posit is  entered  on  the  customer's  regular  account.  The  bank  knows  of 
this  particular  draft.  Would  the  bank  be  justified  in  declining  to  pay 
checks  presented  in  the  regular  course  of  business  which  would  reduce  the 
depositor's  balance  to  an  amount  less  than  the  face  of  the  draft?  If  the 
bank  should  allow  the  balance  checked  out,  would  it  be  liable  to  the  drawer 
of  the  draft  for  not  having  reserved  a  sufficient  fund  to  cover  the  draft? 

A  deposit  may  be  made  for  a  special  purpose,  and  the  bank 
would  be  expected  under  these  circumstances  to  hold  the  deposit 
for  that  particular  purpose.  In  the  case  mentioned,  so  much  of 
the  deposit  as  was  necessary  to  pay  the  particular  draft  specified 
could  properly  be  held  by  the  bank  to  cover  the  draft ;  but  while 
this  is  true,  the  bank  would  be  under  no  contractural  relation 
with  the  drawer  of  the  draft,  and  he  would  have  no  right  to  com- 
plain if  the  amount  was  checked  out.  Of  course,  the  bank  might 
make  itself  liable  to  pay  the  draft  by  accepting  it  or  by  being  a 
party  to  the  contract  by  which  the  deposit  was  made  for  the  pur- 
pose of  covering  the  draft,  but  where  the  bank  had  assumed  no 
direct  obligation  to  the  drawer  of  the  draft,  he  would  have  no 
right  of  action  because  the  bank  had  allowed  the  deposit  checked 
out  by  the  depositor.  To  illustrate,  suppose  a  deposit  is  made  for 
a  particular  purpose,  and  thereafter  the  depositor  changes  his 
mind  about  it,  and  comes  to  the  bank  and  draws  out  the  deposit. 
There  would  seem  to  be  no  reason  why  he  could  not  do  this,  the 
bank  having  assumed  no  obligation  to  any  one  except  the  de- 
positor himself.  The  bank  would  be  justified  in  declining  to  pay 
checks  of  the  customer  unless  these  checks  clearly  indicated  the 
purpose  on  the  part  of  the  customer  to  withdraw  the  special 
deposit,  but  the  payment  of  such  checks  would  not  make  the  bank 
liable  to  any  one  except  the  depositor,  and,  of  course,  he  could  not 
complain  of  the  payment  of  his  own  checks. 


Father  Has  No  Right  to  Check  Out  Money  Deposited  in 
Name  of  Minor  Son. 

Where  a  father  deposits  money  in  a  bank  to  the  credit  of  his  minor  son, 
can  the  bank  pay  out  the  money  on  the  father's  check? 

It  has  been  held  that  a  bank  cannot  pay  out  such  deposit  on  the 
father's  check.  In  the  case  of  Dickinson  v.  Leominster  Savings 
Bank,  decided  by  the  Supreme  Judicial  Court  of  Massachu- 


OPINIONS  of  THE  GENERAL  COUNSEL.  325 

setts,  152  Mass.  51,  25  N.  E.  12,  which  was  a  suit  by  a  minor 
against  a  bank  for  money  deposited  in  her  name  and  paid  out 
to  her  father,  the  court  said:  "The  bank  had  no  right  to  make 
the  payments  to  the  father,  if  the  deposits  were  absolutely  the 
property  of  the  plaintiff,  even  if  the  father  had  made  the  de- 
posits." 

It  is  true,  however,  that  a  deposit  of  money  in  the  name  of  a 
person. does  not  conclusively  show  title  in  the  person  in  whose 
name  the  deposit  is  made.  If  the  bank  should  pay  out  this  money 
on  the  father's  checks,  it  might  be  permitted  to  show  that  the 
money  was  deposited  by  the  father  in  the  name  of  the  son  merely 
for  convenience,  and  was  not  intended  as  a  gift  to  the  son,  and 
that  nothing  had  in  fact  been  done  by  the  son  or  on  his  behalf  in 
the  way  of  accepting  the  gift.  If  these  things  could  be  proved, 
the  bank  might  be  protected  in  a  suit  brought  by  the  son  or  on 
his  behalf. 

In  my  opinion,  however,  the  bank  would  take  a  very  grave  risk, 
for  it  would  certainly  carry  the  burden  of  overcoming  the  prima 
facie  case  made  for  the  minor  by  the  fact  that  the  deposit  stands 
in  his  name. 

The  bank  might  pay  out  the  money  on  the  father's  check  upon 
his  giving  a  bond  with  good  security  conditioned  to  hold  the  bank 
harmless  against  any  claim  which  might  thereafter  be  made  by 
the  son  or  on  his  behalf.  And  of  course  the  bank  could  pay  out 
the  money  on  the  check  of  a  lawfully  appointed  guardian  for  the 
son. 

NOTE. — The  Banking  Act  of  1919,  §  185,  provides :  "A  minor  shall  be 
allowed  to  deposit  money  in  bank  in  his  own  name,  and  the  money  so  de- 
posited shall  not  be  subject  to  the  control  of  his  parent,  guardian  or  trus- 
tees, but  may  be  drawn  or  checked  out  by  the  minor  depositing  the  same 
as  though  he  were  of  full  age." 


Deposit  in  Two  Names  Presumed  to  Belong  Equally  to  the 
Two,  but  Since  Banking  Act  of  1919  May  Be  Paid  to  the 
Survivor. 

What  is  the  status  of  deposits  made  in  the  name  of  two  persons,  where 
one  of  them  dies  and  the  bank  was  not  advised  as  to  the  ownership  of  the 
fund? 

Where  a  deposit  is  made  in  the  name  of  two  persons,  in  the 
absence  of  some  information  as  to  the  real  ownership,  the  law 
would  presume  that  the  fund  was  owned  in  equal  parts  by  the 


326  PARK'S  BANKING  LAW  o$  GEORGIA. 

depositors ;  and  on  the  death  of  one,  his  administrator  would  be 
entitled  to  his  share  in  the  fund,  and  the  other  would  have  no 
right  to  check  out  the  balance.  This  would  be  true  whether  the 
deposit  was  subject  to  the  joint  check  of  the  parties  or  to  the 
check  of  either  of  them. 

It  has  been  held,  however,  that  it  is  competent  for  parties 
making  a  deposit  to  agree  with  each  other  and  with  the  bank  that 
the  fund  deposited  shall  be  subject  to  the  check  of  either  of  the 
depositors  and  to  the  check  of  the  survivor  on  the  death  of 
either  of  them,  the  contract  being  construed  as  amounting  to  a 
gift  inter  v'vuos.  In  the  absence  of  a  distinct  agreement,  however, 
upon  the  death  of  one  of  the  joint  depositors  his  interest  in  the 
fund  would  go,  not  to  the  survivor,  but  to  his  administrator. 

Since  this  was  written  the  Banking  Act  of  1919  has  been 
adopted.  Section  183  of  this  act  provides  that  deposits  made  in 
the  name  of  two  persons,  payable  to  either,  may  be  paid  to  either 
whether  the  other  be  living  or  not.  This  is  now  the  law  in  most 
of  the  States. 


DIRECTORS. 


To  Qualify  as  Such,  Director  Must  Hold  Stock  in  His 
Own  Right. 

Can  one  holding  stock  in  a  bank  as  executor  or  administrator  be  elected 
a  director  of  the  bank? 

Directors  of  a  bank,  under  the  laws  of  Georgia,  must  be  owners 
in  their  own  right  of  the  requisite  amount  of  qualifying  stock. 
The  holding  of  stock  as  executor  or  in  any  other  representa- 
tive capacity  would  not  constitute  one  a  stockholder  within  the 
meaning  of  the  statute,  and,  therefore,  one  so  holding  stock  could 
not  be  made  a  director.  See  §  146,  Banking  Act  of  1919. 


Amount  of  Stock  Necessary  to  Qualify  as  Director  in 
National  Bank. 

A  director  in  a  national  bank  sells  his  stock  to  a  corporation  in  which  he 
owns  half  the  stock,  under  an  agreement  between  himself  and  the  cor- 
poration, that  eight  shares  of  the  bank  stock  are  to  remain  in  his  name  in 
order  that  he  may  continue  to  act  as  a  director  of  the  bank.  Can  he 
legally  act  as  a  director  of  the  bank  after  such  sale? 

'  Under  the  circumstances  stated,  the  director  is  not  qualified 
since  the  sale  of  his  stock  to  act  as  a  director.  The  provision 


OPINIONS  of  THE  GENERAI,  COUNSKL.  327 

of  the  National  Bank  Act,  §  5146  of  the  Revised  Statutes,  is  that: 

"Every  director  must  own  in  his  own  right  at  least  ten  shares 
of  the  capital  stock  of  the  association  of  which  he  is  a  director. 
Any  director  who  ceases  to  be  the  owner  of  ten  shares  of  the 
stock,  or  who  becomes  in  any  other  manner  disqualified,  shall 
thereby  vacate  his  place." 

The  next  section  of  the  Revised  Statutes,  which  prescribes  the 
oath  to  be  taken  by  directors,  requires  that  a  director  must  swear 
"that  he  is  the  owner  in  good  faith  and  in  his  own  right  of  the 
number  of  shares  of  stock  required  by  this  title  subscribed  by  him 
or  standing  in  his  name  on  the  books  of  the  Association." 

It  appears  that  the  director  in  this  case  does  not  hold  the  re- 
quired number  of  shares  of  stock,  even  if  the  arrangement  were 
otherwise  legal.  I  do  not  think,  however,  that  he  would  be  quali- 
fied to  act  as  a  director  under  the  circumstances  stated  even  if 
there  were  ten  shares  of  stock  standing  in  his  name  in  order  to 
qualify  him  as  such  director.  He  has  in  reality  under  that  ar- 
rangement ceased  to  be  the  owner  of  ten  shares  of  stock,  and  is 
not  the  owner  in  good  faith  and  in  his  own  right  of  the  required 
number  of  shares.  He  is  therefore  required,  under  the  provisions 
of  the  National  Bank  Act  referred  to,  to  vacate  his  place  as  di- 
rector. 


Approval  of  Loans  by  Directors. 

At  a  directors'  meeting  loans  made  since  the  last  meeting  are  reported, 
the  notes  examined,  and  the  loans  approved  and  ordered  to  be  entered  on 
the  minutes  as  approved.  Is  such  a  form  of  approval  or  acceptance  bind- 
ing on  the  directors,  and  would  the  cashier  be  relieved  of  responsibility 
for  having  made  these  loans? 

I  do  not  see  how  there  could  be  any  question  about  the  matter. 
The  directors  can  confer  upon  the  cashier  the  power  to  make 
loans,  and  loans  so  made  in  good  faith  would  not  require  any 
further  approval  in  order  to  bind  the  directors  and  relieve  the 
cashier  of  liability.  Where  the  directors  adopt  the  policy,  either 
under  a  by-law  or  by  custom,  of  actually,  at  each  meeting,  going 
over  the  loans  and  formally  by  resolution  approving  them,  this 
approval  would  certainly  be  binding,  and  would  relieve  the  cashier 
of  any  further  liability  for  having  taken  these  particular  notes, 
assuming  always  that  the  cashier  acted  in  good  faith.  It  should 
be  remembered  that  loans  to  officers,  directors  and  employees 
must  be  authorized  in  advance  by  the  board  of  directors  or  by 
a  committee  of  the  board  authorized  to  act.  Banking  Act  of  1919, 
§§  155,  156. 


328  PARK'S  BANKING  LAW  OF  GEORGIA. 

Directors   May  Delegate  to   Committee  Authority  to   Make 
Loans  and  Transact  Ordinary  Business  of  the  Bank. 

How  far  can  the  board  of  directors  of  a  national  bank  empower  the 
executive  committee  to  act?  If  the  board  has  no  right  to  delegate  au- 
thority, can  authority  be  delegated  to  a  committee  by  an  amendment  to  the 
by-laws  ? 

The  board  of  directors  are  the  chosen  representatives  of  a 
bank.  As  such,  they  constitute  the  corporation  to  all  intents  and 
purposes.  What  they  do  within  the  scope  and  object  of  the 
corporation  is  the  act  of  the  corporation  itself.  They  can  not 
abrogate  their  authority  nor  delegate  the  authority  which  has 
been  delegated  to  themselves  by  the  charter  and  by-laws.  They 
have  the  right  to  appoint  committees,  agents  and  offcers,  and 
confer  upon  them  executive  authority,  so  long  as  they  do  not  ab- 
rogate their  own  power  or  relieve  themselves  of  responsibility. 
If  it  is  intended  that  authority  should  be  permanently  exercised, 
either  by  a  committee  or  by  the  officers  of  a  bank,  the  by-laws 
should  so  provide.  It  is  not  unusual.  In  fact,  in  many  institu- 
tions executive  or  finance  committees  are  provided  for  by  the  by- 
laws, which  committees  exercise  in  large  measure  the  powers  of 
the  bank,  making  loans,  discounting  paper,  borrowing  money,  and 
generally  transacting  almost  all  of  the  business  of  the  bank.  Such 
committees  report  their  action  to  the  board,  and  the  board  by 
adopting  the  report  of  the  committee  adopts  its  acts,  and  makes 
them  the  acts  of  the  board  itself.  When  done  in  this  way,  there 
can  be  no  objection  to  the  appointment  of  an  executive  or  finance 
committee,  and  as  a  small  committee  can  much  more  readily  be 
gotten  together,  and  can  act  much  more  quickly,  and  frequently 
more  intelligently  than  a  large  board,  the  desirability  of  appoint- 
ing such  a  committee  is  manifest. 


A  Director  Who  Is  an  Indorser  of  the  Bank's  Paper  Is  Not 
Relieved  of  His  Liability  upon  His  Resignation  and  the 
Sale  of  His  Stock. 

Is  a  director  of  a  bank  who  has  indorsed  the  bank's  paper  released  from 
his  indorsement  when  he  sells  his  stock  and  thereby  ceases  to  be  a  di- 
rector? 

The  sale  of  the  stock  would  in  no  way  affect  the  liability  al- 
ready assumed.  It  can  readily  be  seen  that  if  it  were  otherwise 
all  the  directors  could  resign  and  the  bank  lending  the  money 
would  in  that  event  have  no  security  whatever  for  its  advances 


OPINIONS  OF  THE  GENERAL*  COUNSEL.  329 

other  than  the  liability  of  the  bank  itself.  Unless  the  holder  of 
the  paper  consented,  the  director  would  remain  liable  regardless 
of  the  sale  of  the  stock. 


DISCOUNTS. 


At  Seven  Per  Cent,  or  More,  the  Amount  Reserved  Not  Ex- 
ceeding Eight  Per  cent.,  Not  Usurious  Though  Not  in 
Writing. 

Is  discount  by  a  bank  at  seven  per  cent,  illegal  unless  a  higher  rate  is 
agreed  on  in  writing? 

Park's  Ann.  Code,  §  3426,  provides  that :  "The  legal  rate  of  in- 
terest shall  be  seven  per  cent,  where  the  rate  per  cent,  is  not  named 
in  the  contract,  and  that  any  higher  rate  must  be  specified  in  writ- 
ing, but  in  no  event  to  exceed  eight  per  cent,  per  annum." 

Under  the  decisions  of  the  Supreme  Court,  however,  where  a 
bank  discounts  paper  at  seven  per  cent.,  this  section  of  the  Code  is 
not  violated,  provided  the  discount  charged  does  not  exceed  eight 
per  cent.  I  quote  from  two  decisions  on  the  question. 

In  Tribble  v.  Anderson,  63  Ga.  56,  it  was  said : 

"It  was,  however,  insisted,  as  matter  of  law,  that  when  the 
statute  allowed  a  conventional  rate  of  interest  higher  than  the 
general  rate,  on  condition  that  the  contract  therefor  was  in  writ- 
ing, the  rate  stipulated  for  or  agreed  on  had  to  be  expressed  in 
the  writing,  and  that  to  add  the  principal  and  interest  together, 
giving  a  note  for  the  aggregate,  would  not  be  a  compliance  with 
the  statute.  We  think  otherwise.  The  statute  merely  intended  to 
distinguish  between  written  and  parol  contracts,  declaring  the 
former  effectual  and  the  latter  not.  The  promise  to  pay  might 
be  so  much  in  a  round  sum,  provided  the  statutory  limit  as  to 
rate  was  not  exceeded,  and  if  the  promise  and  the  sum  were  evi- 
denced by  writing  the  contract  would  be  in  writing." 

Following  this  in  the  case  of  Green  v.  Equitable  Mortgage 
Company,  107  Ga.  536,  the  Supreme  Court,  construing  the  Code 
provision  on  this  subject,  said: 

"The  statutory  provision,  that  'Any  higher  rate  [than  seven 
per  cent.]  must  be  specified  in  writing,  but  in  no  event  to  exceed 
eight  per  cent,  per  annum,'  is,  in  a  given  instance,  substantially 
complied  with,  if  in  fact  the  lender  does  not  contract  to  receive 
more  than  eight  per  cent,  per  annum  for  the  use  of  the  principal 
advanced.  The  contract  in  this  case  was  not  usurious." 


330  PARK'S  BANKING  LAW  OF  GEORGIA. 

Officer  or  Director  Cannot  Discount  Paper  Payable  to 

Himself. 

What  is  the  law  with  reference  to  an  officer  and  director  of  a  bank 
discounting  with  the  bank  notes  payable  to  himself,  where  the  amount  of 
such  discount  does  not  exceed  ten  per  cent,  of  the  capital  and  surplus,  the 
officer  and  director  being  a  member  of  the  finance  committee,  which  passes 
on  the  paper? 

An  officer  of  a  bank  has  no  right  to  lend  to  himself,  although 
he  may  have  the  general  authority  to  make  loans.  He  cannot 
represent  the  bank  and  deal  with  himself.  The  same  rule  would 
apply  to  the  discount  of  paper  as  to  making  direct  loans.  A  bank 
can  discount  papers  payable  to  an  officer  or  director,  provided 
it  is  not  by  so  doing  violating  the  section  of  the  Code  prohibiting 
the  lending  to  an  officer  without  good  collateral  or  other  ample 
security.  In  other  words,  if  the  paper  itself  is  good,  there  would 
be  no  reason  why  the  bank  could  not  buy  it,  but  it  should  not  buy 
it  on  the  strength  of  the  officer's  name  alone.  Where  a  loan  is 
being  made  to  a  member  of  the  finance  committee,  such  member 
must  not  act  in  passing  on  the  loan,  and  the  loan  must  be  ap- 
proved by  the  written  signature  of  the  majority  of  the  directors 
or  of  the  committee  authorized  to  act.  Sections  155  and  156  of 
the  Banking  Act  of  1919  fully  cover  the  question. 


DIVIDENDS. 


Directors,  Not  Stockholders,  Declare  Dividends. 

Who  has  the  authority  to  declare  dividends  from  the  profits  of  a  bank, 
the  directors  or  the  stockholders? 

I  quote  from  Cook  on  Corporations,  p.  1471 : 

"The  board  of  directors  declare  the  dividends,  and  it  is  for  the 
directors,  and  not  the  stockholders,  to  determine  whether  or  not 
a  dividend  shall  be  declared." 

The  authority  is  expressly  conferred  on  the  directors  by  §  173 
of  the  Banking  Act  of  1919. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  331 

To  Whom  Payable  Upon  Transfer  of  Stock  Between  Date  of 
Declaration  and  Date  of  Payment. 

Who  is  entitled  to  dividends  on  stock  transferred  after  the  dividends 
are  declared  but  before  they  are  payable? 

I  quote  from  Machen  on  the  Modern  Law  of  Corporations,  §§ 
1370  and  1375 : 

"The  person  who  is  the  registered  holder  at  the  time  the  divi- 
dend is  declared  is  the  person  in  whom,  so  far  as  the  company  is 
concerned,  the  right  to  the  dividend  vests.  This  is  true  even 
where  the  dividend  is  made  payable  at  some  later  date. '  *  *  * 
As  between  transferor  and  transferee  of  shares,  the  right  to 
dividends  is  of  course  a  mere  matter  of  mutual  agreement.  The 
legal  presumption  is  that  the  parties  to  a  contract  of  sale  of  shares 
intend  that  all  dividends  and  bonuses  declared  after  the  making 
of  the  contract,  whenever  the  profits  out  of  which  they  are  de- 
clared may  have  been  earned,  shall  belong  to  the  transferee  and 
that  all  dividends  and  bonuses  declared  prior  to  that  time,  even 
though  not  payable  until  afterwards,  shall  go  to  the  transferor." 

I  think  this  completely  answers  the  question. 


Pledgee  Entitled  to  Dividends  on  Stock  Held  as  Collateral. 

Where  stock  is  pledged  as  collateral,  is  the  holder  entitled  to  collect 
the  dividends  ?  If  the  corporation  is  in  liquidation  is  the  pledgee  entitled 
to  the  liquidation  dividends? 

This  question  is  answered  in  the  case  of  Guarantee  Company  of 
North  America  v.  East  Rome  Town  Company,  96  Ga.  511,  as 
follows : 

"Where  stock  of  an  incorporated  company  is  pledged  by  the 
owner  as  collateral  security  for  the  payment  of  a  debt,  the  pledgee 
is,  as  a  general  rule,  entitled  to  collect  and  receive  the  dividends 
thereon,  unless  this  right  is  reserved  by  the  pledger  at  the  time 
the  pledge  is  made." 

The  pledgee  or  collateral  holder  should  give  notice  to  the  cor- 
poration, and  is  thereafter  entitled  to  demand  and  receive  the 
dividends  declared  on  the  stock. 

It  is  equally  true  that  where  a  corporation  is  in  liquidation,  the 
liquidation  dividends  should  be  paid  to  the  person  holding  stock 
in  the  corporation  as  collateral  security,  and  not  to  the  pledger. 


332  PARK'S  BANKING  LAW  OF  GEORGIA. 

Dividends  Can  Only  Be  Paid  to  Stockholder  or  His  Legal 
Representative,  Although  He  May  Have  Disappeared  and 
His  Whereabouts  Been  Unknown  for  Long  Period. 

Where  a  stockholder  of  a  bank  has  disappeared,  and  his  family  know 
nothing  of  his  whereabouts,  and  nobody  knows  where  his  stock  certificate 
is,  can  the  bank  turn  over  to  his  father  dividend  checks  which  have  ac- 
cumulated during  the  stockholder's  absence? 

The  bank  can  not  pay  over  dividends  to  the  father  of  the 
stockholder  except  at  its  own  risk.  If  the  stockholder  has  been 
absent  and  unheard  of  for  more  than  seven  years,  the  law  would 
presume  that  he  is  dead,  and  his  estate  could  be  administered 
and  the  stock  sold  as  a  part  thereof.  But  if  he  has  not  been  ab- 
sent for  that  long  a  period,  the  presumption  is  that  he  is  still  in 
life  and  will  sooner  or  later  claim  his  stock  and  -the  dividends 
thereon.  In  the  event  he  should  do  so,  the  payment  to  the  father 
would  not  be  any  protection.  It  is  possible,  also,  that  he  may  have 
transferred  his  stock  to  some  one  else,  in  which  event,  while  pay- 
ment to  the  stockholder  of  record  would  be  a  protection,  payment 
to  the  father,  who  is  not  a  stockholder,  would  not  be. 

If  the  stockholder  has  been  absent  for  a  long  period  and  there 
is  not,  as  a  matter  of  fact,  much  probability  of  his  ever  returning, 
the  bank  might  take  the  risk  of  paying  the  dividends  to  the  father, 
taking  from  him  a  bond,  or,  if  his  solvency  is  sufficient  to  justify 
it,  his  personal  obligation,  to  reimburse  the  amount  paid,  with 
interest  and  any  expenses  or  costs  which  might  accrue  on  account 
of  the  payment.  Whether  this  would  be  wise  would  depend  en- 
tirely on  the  circumstances  of  the  case. 


DRAFTS. 


Liability  of  Drawer  After  Acceptance  Is  Secondary,  Acceptor 
Being  Primarily  Liable. 

What  is  the  liability  of  the  drawer  of  a  draft  after  acceptance? 

I  quote  in  substance  from  Parmelee  v.  Williams,  72  Ga.  42 : 

"Where  a  negotiable  draft  was  drawn  and  accepted  by  the 
drawees,  after  negotiation  the  acceptors  were  primarily  and  abso- 
lutely bound  therefor  to  the  holder.  The  drawer  was  bound  to 
pay  if  the  acceptors  did  not.  As  to  the  holder,  the  acceptors  may 
be  regarded  as  makers  and  the  drawer  as  first  indorser." 

This  is  the  well  recognized  rule. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  333 

After  Collecting  Draft  and  Delivering  Order  Notify  Bill  of 
Lading,  Bank  Cannot  Hold  Amount  Paid  by  Request  of 
Drawee  as  Money  Belongs  to  Owner  of  Draft. 

Drawee  of  draft  with  bill  of  lading  order  notify  a  third  party  attached 
pays  draft  to  bank  holding  it  for  collection  and  bill  of  lading  is  delivered 
to  him.  Subsequently  the  third  party  refuses  shipment  on  ground  goods 
are  not  as  ordered.  Drawee  notifies  collecting  bank  not  to  remit  for  draft, 
but  refuses  to  return  bill  of  lading  unless  reimbursed  for  his  loss  in  the 
transaction.  Forwarding  bank  demands  remittance  or  return  of  bill  of 
lading.  What  course  shall  collecting  bank  pursue  ? 

The  purpose  of  shipping  goods  to  the  order  of  the  shipper  and 
attaching  bill  of  lading  to  the  draft  on  the  purchaser  is  to  retain 
title  in  the  shipper  until  the  goods  are  paid  for.  In  the  case  stated, 
as  soon  as  the  drawee  paid  the  draft  and  took  up  the  bill  of  lading, 
title  to  the  property  passed  from  the  shipper  to  him,  and,  of 
course,  the  shipper  was  entitled  to  the  proceeds  of  the  draft,  that 
is,  the  purchase  price  of  the  property  covered  by  the  draft.  The 
collecting  bank  would  have  had  no  authority  to  deliver  the  bill 
of  lading  except  upon  the  payment  of  the  draft.  Having  re- 
ceived payment  it  holds  the  amount  for  the  shipper  or  the  bank 
from  which  it  received  the  draft,  and  would  not  be  authorized 
to  hold  the  amount  or  return  it  to  the  drawee  unless  it  could 
return  the  bill  of  lading,  placing  the  shipper  in  the  same  position 
that  he  would  have  occupied  had  delivery  not  been  made.  The 
drawee  cannot  retain  the  bill  of  lading  which  gives  him  title  to  the 
goods  and  refuse  to  pay  for  them,  or,  what  is  equivalent  to  the 
same  thing,  insist  on  the  bank  holding  the  money. 

Of  course,  in  the  case  stated,  the  situation  is  somewhat  com- 
plicated, by  reason  of  the  fact  that  the  goods  were  rejected,  not 
by  the  original  purchaser  who  paid  the  draft,  but  by  his  cus- 
tomer ;  at  the  same  time  as  between  him  and  the  shipper  the  situ- 
ation is  the  same  as  though  he  had  rejected  the  goods.  Having 
accepted  them  by  the  payment  of  the  draft,  the  collecting  bank- 
will  have  to  remit  to  the  correspondent  from  whom  the  draft  was 
received,  unless  prevented  from  doing  so  by  garnishment  or  some 
other  appropriate  legal  proceeding. 


334  PARK'S  BANKING  LAW  OF  GEORGIA. 

Bank  Which  on  Authority  of  Forged  Telegram  Wires  An- 
other Bank  to  Honor  Draft  Must  Protect  the  Second  Bank 
in  So  Doing. 

If  A  signs  B's  name  to  a  telegram  which  instructs  a  bank  to  wire  an- 
other bank  to  pay  a  certain  sum  to  A  and  the  former  bank  wires  the 
latter  to  honor  A's  draft  on  B  and  it  does  so,  can  the  latter  bank  recover 
the  amount  from  the  former  when  the  fraud  develops  ? 

The  first  bank  would  be  liable  for  the  amount  paid  in  pursuance 
of  its  telegram.  The  second  bank  received  a  genuine  telegram 
from  the  first  bank  directing  the  payment  to  a  named  party,  upon 
his  draft  on  another  party  named.  After  getting  this  telegram, 
and  without  any  reason  to  suspect  that  a  fraud  was  being  perpe- 
trated on  either  bank,  or  on  the  drawee  of  the  draft,  the  second 
bank  honored  the  same.  The  second  bank  was  innocent  in  act- 
ing on  the  telegram,  and  the  other  bank,  as  between  the  two, 
ought  clearly  to  be  the  loser. 


EXCHANGE. 


Rate  Not  Fixed  in  Georgia. 

What  is  the  legal  limit,  if  any,  to  the  amount  of  exchange  to  be  charged 
by  one  bank  in  remitting  to  another  bank  for  checks  drawn  on  the  bank 
remitting? 

The  rate  of  exchange  is  not  fixed  in  Georgia.  -Not  only  is  there 
no  fixed  legal  rate,  but  I  do  not  think  there  is  any  such  customary 
rate  as  would  be  enforceable  as  a  matter  of  custom.  Of  course, 
as  between  particular  banks,  where  a  rate  has  for  a  considerable 
time  been  in  force,  whether  by  agreement  or  by  custom,  no  change 
in  this  rate  should  be  made  without  due  notice;  and  where  the 
banks  in  a  particular  locality  have  for  a  considerable  period  main- 
tained a  regular  fixed  rate  and  other  banks  generally  had  become 
accustomed  to  such  rate,  in  the  absence  of  notice  that  a  change 
will  be  made,  the  forwarding  banks  would  have  a  right  to  assume 
that  the  old  rate  would  remain  in  force.  But  there  is  no  reason 
why  a  bank  can  not  change  the  rate  at  any  time  it  sees  fit.  All 
that  would  be  necessary  would  be  to  notify  the  banks  with  which 
it  does  business  that  a  new  rate  would  be  enforced  from  that  time 
forward.  [But  see  §  171  as  amended  by  Act  of  1920.] 


OPINIONS  of  THE  GENERAL  COUNSEL.  335 

Checks  in  Payment  of  Taxes  Due  the  United  States  Must  Be 
Remitted  at  Par. 

Are  checks  in  payment  of  Government  obligations  required  to  be  re- 
mitted at  par? 

The  Revenue  Act  of  October,  1917,  provides  that  under  Rules 
and  Regulations  prescribed  by  the  Secretary  of  the  Treasury, 
collectors  of  internal  revenue  may  receive,  at  par  and  accrued  in- 
terest, checks  in  payment  of  income  and  excess  profits  taxes, 
during  such  time  and  under  such  regulations  as  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  shall  prescribe. 

In  Treasury  Decision  666,  issued  to  collectors  of  internal 
revenue  by  the  Commissioner  and  approved  by  the  Secretary 
of  the  Treasury  on  March  8,  1918,  the  following  ruling  is  made : 

"Collectors  should  give  the  widest  possible  publicity,  through 
newspapers  and  all  other  available  means,  to  the  fact  that  all 
checks  in  payment  of  income  and  excess  profits  taxes  must  be 
collectible  at  par  (without  any  deduction).  Taxpayers  who  are 
not  sure  that  their  checks  will  be  paid  at  par  should  be  advised 
to  write  beneath  the  amount  'without  deduction  for  exchange,'  or 
'with  exchange.' 

"The  collector  need  not,  however,  examine  all  checks  to  see 
whether  or  not  they  are  collectible  at  par,  but  should  stamp  on 
the  face  of  each  the  words  'This  check  is  in  payment  of  an  obli- 
gation to  the  United  States  and  must  be  paid  at  par.  No  pro- 
test,' with  his  name  and  title.  If  the  bank  on  which  a  check  is 
drawn  should  refuse  to  pay  it  at  par,  it  will  be  returnable  through 
the  depositary  bank  and  should  be  treated  in  the  same  manner  as 
a  bad  check." 

Under  the  law,  therefore,  as  construed  by  the  Treasury  De- 
partment, it  would  seem  that  a  bank  is  required  to  remit  at  par 
for  such  items,  if  it  handles  them  at  all.  I  do  not  think  the  law 
requires  a  bank  to  handle  such  checks  if  it  does  not  wish  to  do  so. 
But  if  it  does  handle  them,  it  must  remit  at  par. 


Checks  May  Be  Made  Payable  in  Exchange  Only. 

Is  it  legal  to  stamp  on  checks  the  phrase,  "payable  in  New  York  or 
Savannah  Exchange,"  the  purpose  of  making  such  an  entry  being  to  pre- 
vent demanding  payment  of  the  check  in  cash  through  the  post  office  or 
through  an  express  company? 

A  check  is  an  order  given  by  the  depositor  to  the  bank  direct- 
ing payment  of  a  portion  or  all  of  his  deposit  to  a  particular 


336  PARK'S  BANKING  LAW  OF  GEORGIA. 

person  or  to  bearer.  The  bank  is  compelled  to  carry  out  the  di- 
rection of  the  depositor  and  pay  in  whatever  manner  the  de- 
positor directs.  To  illustrate  :  The  depositor  may  direct  payment 
to  the  order  of  a  named  person  or  simply  to  the  bearer  of  the 
check ;  and  it  has  been  held  in  Georgia  that  a  depositor  may-  di- 
rect payment  through  a  particular  bank,  and  that  this  direction 
must  be  complied  with.  Farmers  Bank  v.  Johnson,  King  &  Co., 
134  Ga.  486. 

In  discussing  this  case,  the  Supreme  Court  says  that  the  drawer 
of  a  check  has  a  right  to  direct  the  channel  through  which  it  shall 
be  presented  for  payment,  and  the  payee  of  the  check  is  bound  to 
respect  this  direction.  He  can  refuse  to  take  the  check  on  ac- 
count of  such  direction,  but  if  he  takes  it  he  must  present  it 
through  the  channels  directed.  During  the  panic  of  1907,  it  was 
quite  frequent  for  checks  to  be  stamped  payable  only  through  a 
particular  clearing  house,  and  such  directions  were  uniformly 
respected.  Morse,  one  of  the  leading  writers  on  the  law  of  banks 
and  banking,  says : 

"Valid  agreements  may  at  any  time  be  entered  into  between 
the  bank  and  the  customer  concerning  the  species  of  money  or 
currency  in  which  his  checks  may  or  shall  be  honored.  The  hold- 
ers of  the  checks  need  be  no  parties  to  this  agreement.  They  have 
accepted  from  their  debtor  his  check  as  a  means  of  procuring 
money,  but  the  bank  is  not  therefore  liable  to  pay  them  money.  The 
nature  of  the  duty  of  the  bank  to  them  is  determined  by  the  nature 
of  its  duty  to  the  depositor.  It  is  bound  to  offer  to  them  whatever 
it  has  undertaken  with  him  that  it  will  offer  to  holders  of  his 
checks.  If  this  be  unsatisfactory  to  the  holders,  their  sole  recourse 
and  remedy  is  against  him."  Morse  on  Banks  and  Banking,  § 
447. 

It  seems,  therefore,  that  it  is  quite  competent  for  a  bank  to 
agree  with  its  customer  that  his  checks  will  be  honored  in  ex- 
change, or  to  make  any  other  reasonable  agreement  as  to  the  han- 
dling of  his  account ;  and  where  such  agreement  is  made,  anyone 
accepting  a  check  upon  which  such  an  agreement  or  provision  is 
entered  takes  it  subject  to  this  agreement,  and  cannot  compel 
payment  in  any  other  manner  than  that  specified. 


OPINIONS  o$  THE  GENERAL  COUNSEL.  337 

FIXTURES. 


Sold  Under  Retention  Title  Contract,  How  Far  Rights  of 
Vendor  Protected. 

Lighting  plants  are  sold  and  erected  in  farm  houses,  a  gasoline  engine 
being  placed  on  a  foundation  to  which  it  is  securely  attached,  and  the 
houses  being  wired  for  electric  lights.  The  seller  retains  title  to  the 
plant.  Does  the  plant  become  such  a  fixture  by  reason  of  its  being  at- 
tached to  the  ground  and  the  house  that  the  seller  loses  his  right  to  re- 
capture his  property  in  the  event  his  debt  is  not  paid? 

Under  the  Code : 

"Anything  intended  to  remain  permanently  in  its  place,  al- 
though not  actually  attached  to  the  land,  such  as  a  rail  fence,  is 
a  part  of  the  realty,  and  passes  with  it.  Machinery,  not  actually 
attached,  but  movable  at  pleasure,  is  not  a  part  of  the  realty." 
Park's  Ann.  Code,  §  3621. 

This  provision,  however,  does  not  always  provide  a  certain  and 
easy  test  by  which  to  determine,  in  a  given  case,  whether  or  not 
the  article  in  question  remains  personalty,  or  is  attached  to  the 
realty  and  a  part  thereof.  The  intention  of  the  parties  frequently 
determines.  An  article,  which  would  ordinarily  be  regarded  as 
personalty,  may  be  held  to  be  a  fixture;  and,  conversely,  a  fix- 
ture may,  where  the  parties  so  intend,  remain  personalty.  The 
circumstances  under  which  the  article  is  attached,  and  the  use  to 
which  the  property  is  put  frequently  determines  its  character. 
A  lighting  system  attached  to  the  building  would  ordinarily  be 
classified  as  a  fixture  and  would  pass  with  the  property  on  a  sale 
thereof ;  but  where  it  is  sold  under  a  contract  retaining  title,  the 
intention  of  the  parties  that  the  property  should  retain  its  char- 
acter as  personalty  although  attached  to  the  realty  would  govern, 
and  the  seller  of  the  lighting  system  would  not  lose  his  title  al- 
though the  property  should  be  attached  to  the  building.  This  ap- 
plies, however,  only  as  between  the  original  parties  to  the  con- 
tract. A  subsequent  purchaser  of  the  land,  or  a  subsequent  mort- 
gagee thereof,  without  notice  of  the  retention  title  contract,  would 
acquire  rights  superior  to  the  contract.  This  has  been  distinctly 
held  by  the  Supreme  Court : 

"When  land  is  conveyed,  whatever  fixtures  are  annexed  to  the 
realty  at  the  time  of  the  conveyance  pass  with  the  estate  to  the 
vendee  unless  there  be  some  express  provision  to  the  contrary ; 
and  fixtures  pass  to  a  bona  fide  purchaser  of  the  real  estate,  not- 
withstanding an  agreement  between  the  owner  of  the  land  and 
the  vendor  of  the  fixtures  that  they  should  remain  personal  prop- 


22 


338  PARK'S  BANKING  LAW  OF  GEORGIA. 

erty.  The  same  rules  as  to  fixtures  which  apply  as  between 
vendor  and  vendee  apply  also  as  between  mortgagor  and  mort- 
gagee. And  a  mortgage  on  the  land  in  the  absence  of  any  agree- 
ment to  the  contrary  includes  not  only  such  fixtures  as  are  at- 
tached to  the  realty  at  the  time  of  its  execution,  but  such  as 
may  be  annexed  subsequently."  Cunningham  v.  Cureton,  96 
Ga.  489. 

Whether  or  not  the  record  of  the  conditional  sale  contract,  or 
the  note  retaining  title,  would  be  such  notice  as  to  prevent  a  subse- 
quent purchaser,  or  mortgagee,  of  the  land  from  being  a  bona  fide 
holder,  has  not  been  decided  in  Georgia.  The  weight  of  authority 
outside  the  State  seems  to  be  that  record  would  be  notice,  but 
there  is  very  respectable  authority  to  the  contrary.  In  a  recent 
case  the  Georgia  Court  of  Appeals  said  that  it  is  inclined  to  be- 
lieve that  notice  by  the  record  of  a  conditional  sale  contract  would 
be  sufficient  to  prevent  the  purchaser  of  the  land  from  acquiring 
the  title  to  the  fixtures,  but  as  it  was  not  necessary  to  decide  the 
question  in  order  to  dispose  of  the  case,  the  court  expressly  de- 
clined to  pass  on  it.  Empire  Cotton  Oil  Co.  v.  Continental  Gin 
Co.,  21  Ga.  App.  16.  The  question  is,  therefore,  an  open  one  in 
Georgia. 

It  will  be  seen  that  neither  the  seller  of  the  lighting  plants,  nor 
the  holder  of  retention  title  contracts,  are  protected  under  all  cir- 
cumstances. While  the  retention  title  contract  is  good  as  between 
the  seller  of  the  plant  and  the  purchaser,  and  is  probably  good  as 
against  a  subsequent  vendee,  or  mortgagee,  of  the  land,  it  is  not 
good  as  against  such  vendee,  or  mortgagee,  unless  he  has  notice 
of  the  outstanding  contract;  and,  whether  the  record  of  the 
contract  constitutes  such  notice  has  not  been  decided  in  this  State. 


GARNISHMENTS. 


In  Superior  Courts  Answer  May  Be  Filed  at  Second  Term, 
but  in  Justice  Courts  Must  Be  Filed  at  First  Term. 

Does  answer  have  to  be  filed  to  a  summons  of  garnishment  on  the  date 
mentioned  in  the  summons,  that  is,  on  the  first  day  of  the  first  term,  or 
does  the  garnishee  have  until  the  second  term  in  which  to  make  answer, 
and  can  judgment  be  taken  at  the  first  term  in  the  event  answer  is  not 
made  at  that  term? 

In  the  Superior  Courts  the  rule  is  as  follows : 

"When  any  person  summoned  as  garnishee  fails  to  appear  in 
obedience  to  the  summons,  and  answer  at  the  first  term  of  the 


OPINIONS  of  THE  GENERAL  COUNSEL.  339 

court  at  which  he  is  required  to  appear,  the  case  shall  stand  con- 
tinued until  the  next  term  of  the  court ;  and  if  he  should  fail  to 
appear  and  answer  by  said  next  term,  the  plaintiff  may,  on  mo- 
tion, have  judgment  against  him  for  the  amount  of  the  judgment 
he  may  have  obtained  against  the  defendant  in  attachment,  or 
so  much  thereof  as  shall  remain  unpaid  at  the  time  the  judgment 
is  rendered  against  the  garnishee ;  and  the  court  may  continue 
the  case  until  final  judgment  is  rendered  against  the  defendant  in 
attachment."  Park's  Ann.  Code,  §  5097. 

While  this  section  applies  primarily  to  cases  in  attachment,  the 
same  rule  applies  to  garnishments  in  common  law  cases,  that  is, 
on  pending  suits  or  judgments.  As  said  by  the  Supreme  Court: 

"In  the  Superior  Court  the  garnishee  in  all  cases  has  until  the 
first  day  of  the  second  term  after  the  service  of  the  summons  of 
garnishment  in  which  to  answer."  Averback  v.  Spivey,  122  Ga. 
18. 

No  judgment  by  default  can  be  entered  against  the  garnishee 
until  the  second  term,  and  no  judgment  can  be  rendered  against 
the  garnishee  until  after  judgment  is  obtained  against  the  defend- 
ant 

In  justice  courts,  however,  answer  must  be  filed  at  the  first 
term.  I  quote  the  section  of  the  Code  applicable : 

"When  a  process  of  garnishment  is  issued  out,  returnable  to 
any  justice's  court  and  served  upon  the  garnishee,  it  shall  be  the 
duty  of  the  garnishee  to  answer  at  the  term  to  which  the  garnish- 
ment is  made  returnable.  And  in  case  of  failure  so  to  answer,  the 
justice  of  the  peace  shall  enter  a  default  against  the  garnishee, 
and  shall  enter  up  judgment  in  favor  of  the  plaintiff  against  the 
garnishee,  for  such  an  amount  as  may  have  been  obtained  by 
judgment  against  the  defendant,  or  for  such  amount  as  may 
thereafter  be  recovered  in  the  pending  suit."  Park's  Ann.  Code, 
§  4753. 

The  practice  in  the  city  courts  generally  conforms  to  that  in 
the  superior  courts,  but  as  these  courts  are  created  by  special  act, 
the  act  must  in  all  cases  be  looked  to  to  determine  what  the  prac- 
tice in  the  particular  court  may  be.  This  is  also  true  with 
reference  to  the  municipal  courts  recently  created  in  some  of  the 
larger  cities. 


340  PARK'S  BANKING  LAW  of  GEORGIA. 

Answer  Must  Include  All  Property  Coming  Into  Hands  of 
.     and  all  Debts  Due  by  Garnishee  Up  to  Date  of  Answer. 

When  a  garnishee  files  answer  to  summons  of  garnishment  at  the  second 
term,  should  the  answer  include  the  amount  due  the  debtor  at  the  time 
of  the  answer  or  the  amount  due  at  the  date  the  garnishment  is  return- 
able? 

The  garnishee  is  required  to  answer  what  property,  money  or 
effects  of  the  defendant  he  had  in  his  hands  at  the  date  of  the 
service  of  the  summons,  and  also  what  property,  money  or  ef- 
fects have  come  into  his  hands  at  any  time  from  the  date  of  the 
service  to  the  date  of  the  answer,  and  what  amount  he  is  in- 
debted to  the  defendant  at  the  date  of  the  service,  and  what  addi- 
tional amount  he  may  have  become  indebted  between  the  date  of 
the  service  and  the  answer  thereto.  Park's  Ann.  Code,  §  5271. 

Under  this  section  the  answer  should  include  all  funds  or  prop- 
erty coming  into  the  hands  of  the  garnishee  and  all  indebtedness 
up  to  the  date  of  the  answer. 


National  Banks  Are  Subject  to  Garnishment. 

Is  a  depositor's  account  with  a  national  bank  subject  to  garnishment? 

It  is.  The  Judicial  Code  of  the  United  States,  §  24  ( 16)  pro- 
vides that  except  in  suits  commenced  by  the  United  States  or  its 
officers  and  cases  for  winding  up  their  affairs,  "national  banking 
associations  shall,  for  the  purposes  of  all  other  actions  by  or 
against  them,  real,  personal  or  mixed,  and  all  suits  in  equity,  be 
deemed  citizens  of  the  States  in  which  they  are  respectively  lo- 
cated." 

While  §  5244  of  the  U.  S.  Rev.  Stat.  provides  that  "no  attach- 
ment, injunction  or  execution  shall  be  issued  against  such  [na- 
tional banking]  association  or  its  property  before  final  judgment 
in  any  suit,  action  or  proceeding  in  any  state,  county  or  municipal 
court";  the  Supreme  Court  of  the  United  States  holds  that  it 
does  not  prohibit  the  suing  out  of  a  garnishment  against  the 
bank  as  garnishee,  as  this  is  not  an  attachment  against  the  bank 
or  its  property  nor  a  suit  against  it  within  the  meaning  of  this 
section.  Earle  v.  Pennsylvania,  178  U.  S.  449,  44  L.  Ed.  1146. 


OPINIONS  of  THE  GENERAL  COUNSEL.  341 

Deposit  to  Credit  of  "A,  Agent,"  May  Be  Subjected  on 
Garnishment  Against  A. 

A  deposit  is  made  by  A,  Agent."  The  bank  is  served  with  garnishment 
against  "A"  individually,  but  is  notified  at  the  time  that  it  is  contended  the 
deposit  is  really  the  money  of  "A"  and  not  of  his  wife  for  whom  he  claims 
to  be  acting  as  agent.  Must  the  bank  hold  the  deposit  subject  to  the  gar- 
nishment or  can  it  pay  the  money  over  on  check  signed  by  "A,  Agent"? 

In  the  case  of  Pettey  v.  Dunlap  Hardware  Company,  99  Ga. 
300,  the  Supreme  Court  held  that  where  money  was  deposited 
to  the  credit  of  a  named  person,  as  agent,  it  could  be  reached  by 
garnishment  served  upon  the  bank  at  the  instance  of  the  creditor 
of  the  depositor,  and  if  the  bank  knew  the  creditor's  contention 
was  that  this  money  in  fact  belonged  to  the  depositor,  individually, 
and  not  to  another  for  whom  he  claimed  to  act  as  agent  in  making 
the  deposit,  it  could  not,  except  at  its  peril,  pay  over  the  money 
to  the  alleged  principal. 

Under  this  ruling  it  would  be  the  duty  of  the  bank  to  hold  the 
deposit  subject  to  the  garnishment.  If  the  money  in  fact  belonged 
to  another  person  for  whom  the  depositor  was  acting  as  agent, 
that  person  could  claim  the  fund  in  the  garnishment  proceeding, 
and  by  giving  a  bond  dissolve  the  garnishment  and  check  out 
the  deposit.  The  bank  should  require  this  before  paying  over  the 
money  to  the  alleged  principal. 


Negotiable  Instruments  Are  Subject  to  Garnishment. 

Where  a  bank  has  issued  a  cashier's  check  or  certificate  of  deposit  and 
afterward  is  served  with  a  summons  of  garnishment  at  the  instance  of  a 
creditor  of  the  customer,  can  it  safely  pay  over  the  money  to  a  third  person 
to  whom  the  check  or  certificate  has  been  indorsed? 

Negotiable  instruments  are  subject  to  garnishment  and  where 
the  maker  of  such  an  instrument  is  served  with  garnishment  based 
on  a  suit  against  the  payee,  he  pays  the  instrument  at  his  peril. 

Therefore,  a  bank  would  not  be  safe  in  paying  such  a  certificate 
of  deposit  or  cashier's  check,  although  it  had  been  indorsed  to  a 
third  person.  The  proper  course  for  the  bank  would  be  to  answer 
the  garnishment,  setting  up  the  fact  that  the  certificate  or  check 
had  been  given  and  that  the  amount  was  due  but  that  the 
bank  could  not  say  whether  it  was  due  to  the  original  payee 
or  to  some  other  person.  Unless  this  was  done  the  burden  would 
be  upon  the  bank  to  show  that  the  check  or  certificate  had  been 
transferred  before  the  garnishment  was  issued,  and  that  the  party 
presenting  the  same  was  a  bona  fide  holder. 


342  PARK'S  BANKING  LAW  OF  GEORGIA. 

Deposit  Is  Subject  to  Garnishment  Even  After  Check  Drawn 
Against  Same  Is  Held  by  the  Bank,  but  Not  Charged  to 
Depositor's  Account. 

Is  a  savings  bank  account  subject  to  garnishment,  where  check  on  this 
account  has  been  turned  over  to  a  bank  as  security  for  a  loan? 

The  giving  of  a  check  would  not  prevent  the  account  from 
being  subjected  under  process  of  garnishment.  A  check  is  not  an 
assignment  of  the  fund,  and  is  revocable  until  actually  paid. 
Quoting  from  the  Supreme  Court : 

"An  unaccepted  check,  drawn  in  the  ordinary  form,  not  de- 
scribing any  particular  fund  or  using  words  of  transfer  of  the 
whole  or  any  part  of  any  amount  standing  to  the  credit  of  the 
drawer,  does  not  amount  to  an  assignment  at  law  or  in  equity  of 
the  money  to  the  credit  of  the  drawer."  Reviere  v.  Chambliss, 
120  Ga.  714. 

The  fact  that  the  bank  holds  the  check  would  not  prevent  the 
drawer  of  the  check  from  giving  another  check,  which  if  pre- 
sented for  payment  before  the  one  held  by  the  bank  would  be 
entitled  to  be  cashed  in  preference  to  it.  As  the  title  to  the  fund 
does  not  pass  by  the  giving  of  a  check,  it  would  still  be  subject  to 
garnishment. 


Cashier's  Check  Issued  to  Depositor  in  Exchange  for  Check 
of  Another  Subsequent  to  Service  of  Garnishment  Is  Sub- 
ject. 

A  garnishment  is  served  on  a  bank  in  a  suit  against  a  depositor.  The 
depositor  presents  a  check  payable  to  his  order  drawn  by  a  third  person 
and  asks  the  bank  to  exchange  the  check  for  a  cashier's  check.  If  the 
cashier's  check  is  issued,  does  the  amount  which  it  represents  become  sub- 
ject to  garnishment? 

In  my  opinion  the  amount  of  the  cashier's  check  is  subject. 
A  garnishment  calls  on  the  garnishee  to  answer  what  property, 
money,  or  effects  of  the  defendant  he  has  in  his  hands  at  the  time 
the  garnishment  is  served,  what  property,  money,  or  effects  have 
come  into  his  hands  at  any  time  between  the  date  of  the  service 
and  the  date  of  filing  his  answer,  what  amoun;.  he  owes  the  de- 
fendant at  the  date  of  the  service,  and  what  amount  he  has  be- 
come indebted  to  the  defendant  at  any  time  between  the  date 
of  the  service  and  the  date  of  the  answer.  When  a  bank  issues 
a  cashier's  check  in  lieu  of  another  check,  it  becomes  indebted 
to  the  holder  of  the  check  for  the  amount  thereof,  and,  therefore, 
would  have  to  answer  that  it  owed  the  defendant  this  amount. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  343 

Indeed,  it  is  by  no  means  certain  that  a  bank  can  safely  pay  a 
check  to  a  person  where  garnishment  has  been  served  on  the 
bank  calling  on  it  to  answer  what  amount  it  owes  the  payee. 
It  has  been  held  by  the  Court  of  Appeals  (Watt-Harley-Holmes 
Hdw.  Co.  v.  Day,  1  App.  646)  that  after  the  delivery  of  a  check 
the  drawer  of  the  check  can  not  be  garnished  as  debtor  of  the 
payee  in  respect  to  the  debt  for  which  the  check  is  given.  This 
would  seem  to  imply  that  the  bank,  so  far  as  the  garnishment  is 
concerned,  would  be  treated  as  the  debtor  of  the  payee  and  as 
having  funds  in  its  possession  belonging  to  the  payee.  If  this  is 
true,  it  could  not  pay  the  amount  to  the  payee  after  being  served 
with  garnishment.  In  the  absence  of  a  ruling  from  one  of  our 
appellate  courts,  the  only  safe  thing  for  a  bank  to  do  where  gar- 
nishment has  been  served  on  it  against  a  particular  party  is  to 
decline  to  pay  that  party  anything  either  on  his  own  check  or  on 
the  check  of  another,  and  certainly  it  could  not  make  itself  the 
primary  obligor,  as  by  issuing  a  cashier's  check  or  by  certifying 
a  check  in  his  favor,  without  rendering  itself  liable  under  the 
garnishment. 


Contents  of  Safety  Deposit  Box  May  Be  Reached  by  Gar- 
nishment. 

Where  a  garnishment  is  served  upon  a  bank,  can  it  safely  allow  a  cus- 
tomer, defendant  in  the  garnishment  proceeding,  access  to  a  safety  deposit 
box,  which  the  bank  has  rented  to  such  customer,  the  contents  of  the  box 
being  unknown  to  the  bank,  and  is  the  bank  required  in  response  to  the 
garnishment  to  answer  that  it  has  property,  money  or  effects  of  the  de- 
fendant in  its  custody  or  control? 

The  precise  question  does  not  seem  to  have  been  decided  in 
Georgia.  It  has  been  held,  however,  that  where  a  defendant  left 
with  a  garnishee  a  large  box,  securely  nailed,  for  safe  keeping, 
the  garnishee  declining  to  be  responsible  for  it  and  not  knowing 
its  contents,  the  garnishee  was  liable  where  he  permitted  the  de- 
fendant to  go  into  the  box  and  remove  its  contents.  Loyless  z/. 
Hodges,  44  Ga.  647. 

There  appear  to  be  only  a  few  reported  cases  in  which  the 
precise  question  as  to  whether  the  contents  of  a  safety  deposit 
box  may  be  reached  by  garnishment  has  been  decided.  Probably 
the  leading  case  is  Tillinghast  v.  Johnson,  82  Atl.  788,  41  L.  R.  A. 
(N.  S.)  764,  decided  by  the  Supreme  Court  of  Rhode  Island.  I 
quote  the  headnote : 


344  PARK'S  BANKING  LAW  OF  GEORGIA. 

"A  safe  deposit  box,  kept  in  the  vault  of  a  safe  deposit  company 
subject  to  its  general  control,  access  to  which  can  be  obtained  only 
under  restrictions  imposed  by  it,  is  in  its  possession,  although  the 
box  has  been  rented  to  a  customer,  and  can  be  opened  only  by 
the  joint  use  of  a  master  key  in  the  possession  of  the  company  and 
a  key  in  the  possession  of  the  customer,  and  hence  is  subject  to  at- 
tachment by  garnishee  process  against  the  company  in  an  action 
against  the  customer." 

To  the  same  effect  is  Trowbridge  v.  Spinning,  23  Wash.  48,  62 
Pac.  125,  54  L.  R.  A.  204;  Washington,  etc.,  Co.  v.  Susquehanna 
Coal  Co.,  26  App.  D.  C.  149,  and  National  Safe  Deposit  Co.  v. 
Stead,  250  111.  584,  95  N.  E.  973. 

The  editor  of  the  Lawyers'  Reports  Annotated,  New  Series,  in 
a  note  to  the  Tillinghast  case  above  cited,  says : 

"As  to  the  garnishment  of  the  contents  of  securely  closed  re- 
ceptacles, while  there  are  cases  to  the  contrary  under  some  stat- 
utes, the  weight  of  authority  is  in  accord  with  Tillinghast  v. 
Johnson,  to  the  effect  that  such  property  is  subject  to  garnish- 
ment." 

It  has  been  generally  held  that  a  sealed  package  or  a  locked 
trunk  in  the  possession  of  a  bailee,  although  the  bailee  may  not 
know  its  contents  and  may  have  no  access  to  it,  is  subject  to  gar- 
nishment. I  am,  therefore,  of  the  opinion  that  a  bank  renting  a 
safety  deposit  box  would  be  required  in  obedience  to  a  summons 
of  garnishment,  calling  on  it  to  answer  what  property,  money  or 
effects  of  a  customer  renting  a  box  it  had  in  its  possession,  would 
be  required  to  answer  the  fact  that  it  had  rented  the  box  to  the 
customer,  but  did  not  know  the  contents  thereof ;  and  that  it 
could  not  safely  permit  the  customer  to  withdraw  any  of  the 
articles  deposited  so  long  as  the  garnishment  is  pending. 


How  Garnishment  Should  Be  Answered  Where  Bank  Has 
More  Than  One  Account  in  Same  or  Similar  Names  as 
That  of  Defendant  in  Garnishment. 

A  bank  is  served  with  a  summons  of  garnishment  against  Earl  S.  The 
bank  has  accounts  with  E.  D.  S.,  E.  M.  S.,  and  E.  R.  S.,  one  of  whom  is 
supposed  to  be  Earl  S.,  the  party  named  in  the  garnishment.  How  should 
the  garnishment  be  answered? 

If  the  bank  actually  knows  that  one  of  these  parties  is  named 
Earl  S.,  it  should  answer  indebted.  If  it  does  not,  it  should  an- 
swer not  indebted,  and  set  up  the  fact  that  it  has  these  three  ac- 
counts. 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  345 

As  a  matter  of  expediency,  it  would  be  wise  to  ascertain,  if 
possible,  from  the  three  depositors  which  one  is  Earl  S.,  or  from 
the  garnishing  creditor  which  one  of  the  accounts  he  is  attempt- 
ing to  reach,  and  hold  up  that  account  only. 


HOLIDAYS. 


Banks  Are  Not  Prohibited  from  Carrying  on  Ordinary 
Business  on  Legal  Holidays. 

Can  a  bank  safely  carry  on  its  general  business  on  a  legal  holiday? 

There  is  nothing  in  the  law  which  prohibits  a  bank  from  carry- 
ing on  its  business  on  a  legal  holiday  if  it  desires  to  do  so.  There 
are  certain  things  which  the  law  forbids  to  be  done  on  a  legal 
holiday,  but  the  prohibition  extends  only  to  the  things  named  in 
the  statute.  The  statute  enumerates  the  public  holidays  recog- 
nized in  this  State,  -and  declares  that  these  days  "shall  for  all 
purposes  whatsoever  as  regards  the  presenting  for  payment  or 
acceptance  and  the  protesting  and  giving  notice  of  the  dishonor 
of  bills  of  exchange,  bank  checks  and  promissory  notes  be  treated 
and  considered  as  the  first  day  of  the  week,  commonly  called 
Sunday,  and  as  public  holidays;  and  all  such  bills,  checks  and 
notes  otherwise  presentable  for  acceptance  or  payment  on  said 
days  shall  be  deemed  to  be  presentable  for  acceptance  or  payment 
on  the  next  business  day  thereafter."  Park's  Ann.  Code,  §  4284. 

This  is  the  only  restriction  upon  carrying  on  business  on  a 
public  holiday. 

The  Supreme  Court  and  the  Court  of  Appeals  have  both  held 
that  the  courts  may  sit  and  judicial  business  may  be  transacted  on 
a  public  holiday.  Hamer  v.  Sears,  81  Ga.  288;  Wood  v.  The 
State,  12  App.  651. 

And  the  Supreme  Court  has  said  that 

"The  General  Assembly  has  not,  however,  seen  proper  to  pro- 
vide for  an  entire  cessation  of  business  on  public  holidays.  On 
such  days  it  is  not  lawful  to  note  and  protest  bills  and  notes,  but 
further  than  this  the  law  does  not  prohibit  the  carrying  on  of 
business  vocations."  Watson  v.  Mayor  and  Council  of  Thomson, 
116  Ga.  546,  547. 


346  PARK'S  BANKING  LAW  OF  GEORGIA. 

Stockholders'  Meeting  May  Be  Held  on  Holiday. 

Can  a  stockholders'  meeting  be  held  legally  on  the  first  day  of  January? 

The  fact  that  New  Year's  Day  is  a  public  holiday  does  not 
render  illegal  business  transactions  on  that  day.  In  the  absence 
of  a  by-law  prohibiting  it  a  corporate  meeting  may  be  held 
legally  on  a  holiday. 


Note  Falling  Due  on  Holiday,  When  Payable. 

When  should  a  note  which  falls  due  on  Sunday  be  presented  for  pay- 
ment when  the  Monday  following  is  a  holiday? 

Such  a  note  should  be  presented  on  the  Tuesday  following. 
The  question  is  settled  by  §  4285  of  the  Code,  which  is  as  follows : 

"All  bills,  checks,  notes,  and  other  evidences  of  debt  maturing 
on  Sunday  or  a  public  holiday  shall  be  payable  on  the  next  busi- 
ness day  thereafter;  and  all  bills,  checks,  notes,  and  other  evi- 
dences of  debt  presentable,  by  their  terms,  for  acceptance  or  pay- 
ment on  Sundays  or  on  a  public  holiday  shall  be  presentable  for 
acceptance  or  payment  on  the  next  business  day  thereafter.  By 
business  day  is  meant  a  day  other  than  Sunday  or  a  public  holi- 
day." 


Legal  Holiday  Falling  on  Sunday. 

Does  the  Georgia  law  provide  for  the  contingency  of  a  legal  holiday 
falling  on  Sunday? 

Our  Code  is  entirely  silent  on  the  subject,  and  while  it  has 
been  customary  for  the  banks  to  observe  the  next  day,  or  Monday, 
as  a  holiday  in  place  of  one  falling  on  Sunday,  it  is  very  doubtful 
whether  a  day  so  observed  is  legally  a  holiday.  It  has  been  ex- 
pressly held  in  other  States  that  "where  a  holiday  designated  by 
a  statute  falls  on  Sunday,  the  following  Monday  is  not  a  holiday, 
in  the  absence  of  express  statutory  provision  to  that  effect." 

Under  the  Code  of  1895,  §  3693,  it  was  provided : 

"Whenever  any  such  holiday  [referring  to  the  usual  holidays 
like  the  first  of  January,  the  nineteenth  of  January  and  twenty- 
second  of  February,  etc.]  shall  fall  upon  Sunday,  the  Monday 
next  following  shall  be  deemed  a  public  holiday,  and  papers  due 
on  such  Sunday  shall  be  payable  on  the  Saturday  next  preceding, 
and  papers  which  would  otherwise  be  payable  on  such  Monday 
shall  be  payable  on  the  Tuesday  next  thereafter,"  etc. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  347 

In  1906  (Acts  of  1906,  p.  43)  the  Legislature  amended  this  sec- 
tion as  follows : 

"Whenever  any  such  holiday  shall  fall  upon  Sunday,  the  Mon- 
day next  following  shall  be  deemed  a  public  holiday,  and  papers 
due  on  such  Sunday  shall  be  payable  on  the  secular  or  business 
day  next  succeeding.  Whenever  either  of  the  days  shall  fall  on 
Saturday,  the  papers  due  on  that  day  or  on  the  Sunday  following 
shall  be  payable  on  the  business  day  next  succeeding." 

In  1907  (Acts  of  1907,  p.  97)  a  new  law  was  passed  reading 
as  follows : 

"That  hereafter  all  bills,  checks,  notes  and  other  evidences  of 
debt  maturing  on  Sunday  or  a  public  holiday  shall  be  payable  on 
the  next  business  day  thereafter,  and  all  bills,  checks,  notes  and 
other  evidences  of  debt  presentable  by  their  terms  for  acceptance, 
or  payment  on  Sundays  or  on  a  public  holiday  shall  be  presentable 
for  acceptance  or  payment  on  the  next  business  day  thereafter. 
By  business  day  is  meant  a  day  other  than  Sunday  or  a  public 
holiday." 

This  act  is  codified  in  §  4285  of  the  Code  of  1910,  and  also  in 
Park's  Ann.  Code. 

The  question,  therefore,  is  whether  the  Act  of  1907  repealed 
§  3693  of  the  Code  of  1895  as  amended  by  the  Act  of  1906,  and, 
if  not,  whether  the  codification  of  the  law  in  1910  had  that  effect. 

"Where  the  later  of  two  acts  covers  the  whole  subject  matter 
of  the  earlier  one,  not  purporting  to  amend  it,  and  plainly  shows 
that  it  was  intended  to  be  a  substitute  for  the  earlier  act,  such 
later  act  will  operate  as  a- repeal  of  the  earlier  one,  though  the 
two  are  not  repugnant."  26  A.  &  E.  Enc.  of  Law,  2d  Ed.  731  (c) . 

This  is  quoted  as  the  law  of  this  State  in  Thornton  v.  The  State, 
5  Ga.  App.  397,  and  is  abundantly  supported  by  decisions  of  the 
Supreme  Court. 

The  cases  which  hold  that  repeals  by  implication  are  not  fa- 
vored and  will  not  result  unless  the  later  statute  is  clearly  repug- 
nant to  a  former  one,  recognize  this  as  the  rule : 

"Or  it  must  be  clear  from  the  terms  of  the  later  statute  that 
there  was  a  legislative  intent  to  cover  the  subject  matter  of  the 
former  statute  and  have  the  later  statute  operate  as  a  substitute 
therefore."  Edalgo  v.  Southern  Ry.  Co.,  129  Ga.  258,  264. 

Again : 

"An  implied  repeal  results,  from  some  enactment,  the  terms  and 
necessary  operation  of  which  can  not  be  harmonious  with  the 
terms  and  necessary  effect  of  the  earlier  act." 

This  is  quoted  from  Southerland  on  Statutory  Construction  in 
Western  &  Atlantic  R.  R.  v.  Atlanta,  113  Ga.  536,  556. 


348  PARK'S  BANKING  LAW  OF  GEORGIA. 

It  may  well  be  argued  that  the  Act  of  1907  was  intended  as  a 
substitute  for  §  3693  of  the  Code  of  1895,  as  amended  by  the  Act 
of  1906,  p.  43.  It  will  be  recalled  that  great  confusion  resulted 
after  the  passage  of  the  Act  of  1906  as  to  when  papers  ma- 
turing on  holidays  were  due,  and  it  was  to  clear  up  this  doubt  and 
provide  a  simple  uniform  rule,  easy  of  application,  that  the  Act 
of  1907  was  adopted. 

The  caption  of  the  Act  of  1907  is  as  follows : 

"An  act  to  provide  for  "the  payment  and  presentation  for  accept- 
ance or  payment  of  bills,  checks,  notes  and  other  evidences  of 
debt,  maturing  on  Sunday  or  a  public  holiday,  or  presentable  for 
acceptance  or  payment  on  Sundays  or  public  holidays." 

The  caption,  therefore,  as  well  as  the  body  of  the  act,  pur- 
ports, I  think,  to  cover  the  entire  subject.  It  is  very  similar  to 
the  caption  of  the  Act  of  1906 : 

"An  act  to  amend  §  3693,  Volume  2,  of  the  Code  of  1895 
*  *  *  which  section  relates  to  the  time  when  promissory 
notes,  etc.,  shall  be  paid  in  connection  with  a  public  holiday,  by 
striking  from  said  section,  etc." 

It  is  true  that  the  language  of  the  Act  of  1907  is  not  necessarily 
repugnant  to  that  part  of  the  previous  law  which  provided  that 
the  Monday  following  should  be  regarded  as  a  legal  holiday,  but 
the  purpose  of  the  Act  of  1907  seems  to  have  been  to  supersede 
the  legislation  on  the  subject. 

When  the  history  of  this  act  is  taken  into  consideration  it 
seems  clear  that  the  legislature  had  this  in  mind.  It  appears  that 
the  last  act  was  a  substitute,  and  though  not  repugnant  in  all  re- 
spects, was  intended  to  supersede  the  prior  law.  Judge  Hopkins 
evidently  took  this  view  of  it,  as  he  omitted  entirely  in  the  Code 
of  1910  the  original  section  of  the  Code  of  1895,  as  well  as  the 
amendment  of  1906 ;  and  as  he  cites  both  the  original  Act  of  1894 
and  the  Act  of  1906,  it  seems  that  he  considered  the  three  acts 
together  and  came  to  the  conclusion  that  the  Act  of  1907  was  in- 
tended to  express  the  legislative  intent  on  the  whole  subject. 

But  whether  the  legislature  intended  that  the  Act  of  1907 
should  supersede  all  of  the  previous  acts  on  the  subject,  I  am  in- 
clined to  the  opinion  that  since  the  adoption  of  the  Code  of  1910. 
§  3693  of  the  Code  of  1895  and  the  Act  of  1906,  except  as  codified 
in  §  4285  of  the  Code  of  1910,  are  repealed.  It  is,  of  course,  true 
that  the  mere  omission  of  a  law  from  the  Code  does  not  have 
the  effect  of  a  repeal,  but  while  this  is  true,  it  is  also  true  that 
whatever  is  contained  in  the  Code  has  the  force  and 


OPINIONS  OF  THE  GENERAL  COUNSEL.  349 

effect  of  a.  statute,  and  where  it  appears  that  the  codifiers  with 
knowledge  of  an  act  omitted  it  and  undertook  to  give  their  con- 
struction of  the  law  or  to  revise  it,  this  construction  or  revision 
becomes  the  law  regardless  of  the  omission.  The  fact  that  this 
act  is  cited  in  the  margin  of  the  section  shows  that  the  codifier 
knew  of  its  existence,  and  the  section  as  we  have  it  gives  his  con- 
struction of  the  law.  See  as  to  the  effect  of  marginal  references 
Barnes  v.  Carter,  114  Ga.  886,  889;  s.  c.,  120  Ga.  895,  897. 

Where  the  Code  section  undertakes  to  deal  with  the  subject, 
and  the  section  differs  from  the  act  which  is  being  codified,  as 
for  instance  where  words  or  clauses  are  omitted,  the  rule,  as  I 
understand  it,  is  that  the  court  is  bound  to  presume  that  the 
change  was  made  or  the  clause  omitted  intentionally.  Miller  v. 
Southwestern  R.  R.  Co.,  55  Ga.  143.  See  also  Kennedy  v.  Mc- 
Cardle,  88  Ga.  454.  Quoting  from  Verdery  v.  Dotterer,  69  Ga. 
194,  197: 

"This  provision  of  the  law,  however,  is  no  longer  of  force,  for 
in  the  revision  of  this  section  of  this  act  the  codifiers  have  con- 
fined the  liability  alone  to  mortgagees,  etc.  Had  it  simply  been 
omitted  from  the  Code,  it  might  have  been  held  still  to  be  of  force, 
but  having  revised  and  changed  it,  it  is  the  law  as  it  now  stands 
in  the  Code." 

From  the  marginal  references,  as  well  as  from  the  insertion  of 
the  1905  Code  section  number,  it  appears  that  Judge  Hopkins 
undertook  to  put  in  this  section  the  law  as  he  understood  it  from 
the  Acts  of  1894,  1906.and  1907.  The  conclusion  may  be  reached, 
therefore,  that  the  omitted  parts  of  those  acts  were  intentionally 
omitted,  and  that  the  adoption  of  the  Code  made  this  section  the 
law,  regardless  of  what  it  had  been  before,  and  the  omitted 
clauses  and  portions  of  the  acts  were  repealed. 

The  question  is  one  of  much  importance  and  of  far-reaching 
effect.  It  is  very  doubtful,  and  there  is  no  way  to  determine  what 
view  the  Supreme  Court  might  take  of  it. 


350  PARK'S  BANKING  LAW  OF  GEORGIA. 

HOMESTEAD. 


Waiver  of  Existing  Homestead  Invalid.  Proceeds  of  Home- 
stead Property  Also  Exempt.  Homestead  for  Wife  and 
Minor  Children  Continues  Until  Death  of  Wife  and  Ma- 
jority or  Marriage  of  Children. 

The  head  of  a  family  to  whom  a  homestead  was  set  apart  some  years 
ago,  signs  a  note  which  contains  a  waiver  of  homestead  and  also  a  state- 
ment that  there  are  no  homesteads,  mortgages  or  liens  upon  the  property. 
He  subsequently  claims  that  certain  property  represents  the  proceeeds  of 
the  original  homestead  estate.  The  wife,  who  was  the  beneficiary  of  the 
homestead,  has  died,  and  the  children  are  able  to  support  themselves, 
though  they  are  still  minors.  First :  Would  the  waiver  or  the  statement 
that  there  is  no  homestead  defeat  the  homestead?  Second:  Would  the 
homestead  attach  to  the  proceeds  of  the  original  property?  Third:  Would 
the  homestead  still  subsist,  notwithstanding  the  death  of  the  wife? 

1.  While  a  debtor  may  waive  or  renounce  his   right  to  the 
benefit  of  a  homestead,  a  prior  homestead,  that  is  to  say,  one  that 
has  already  been  set  apart,  is  not  affected  by  such  waiver,  but 
remains  in  full  force.     This  has  been  decided  by  the  Supreme 
Court  in  several  cases.     Sigman  v.  Austin,  112  Ga.  570.     Nor 
would  the  statement  in  the  note  that  the  property  is  unincum- 
bered,  or  that  there  is  no  homestead,  lien  or  incumbrance  thereon, 
defeat  a  homestead  already  set  apart.    This  might  amount  under 
some  circumstances  to  cheating  and  swindling,  but  it  would  not 
affect  the  homestead.    A  homestead  is  set  apart  for  the  benefit  of 
the  wife  and  minor  children,  and  no  act  of  the  head  of  the  family 
can  deprive  them  of  their  interest  therein. 

2.  The  Code  provides  that  "All  produce,  rents  or  profits  arising 
from  homesteads  shall  be  for  the  support  and  education  of  the 
families  claiming  said  homesteads,  and  shall  be  exempt   from 
levy  and  sale  except  as  provided  in  the  Constitution."     Park's 
Ann.  Code,  §  3398.    Under  this  section  the  courts  have  held  that 
the  proceeds  of  homestead  property,  no  matter  how  invested,  are 
exempt  from  levy  and  sale  to  the  same  extent  that  the  original 
homestead  property  is  exempt. 

3.  The  property  set  apart  for  a  wife  and  minor  children,  upon 
the  death  of  the  wife  and  the  majority  of  the  children,  or  their 
marriage  during  minority,  reverts  to  the  estate  from  which  it  was 
set  apart.     Park's  Ann.  Code,  §  3396.     So  long  as  the  children 
remain  minors  and  unmarried,  the  homestead  would  continue  for 
their  benefit,  notwithstanding  the  fact  that  they  might  be  able  to 
support  themselves. 


OPINIONS  of  THE  GENERAL  COUNSEL.  351 

HUSBAND  AND  WIFE. 


Husband  and  Wife  May  Be  Partners  in  Business. 

Is  an  open  partnership  between  husband  and  wife  legal  in  Georgia? 

While  there  are  certain  restrictions  upon  the  right  of  a  married 
woman  to  contract  under  the  law  of  Georgia,  she  can  neverthe- 
less be  a  bona  fide  member  of  a  partnership  with  her  husband. 

Under  the  law  of  Georgia,  a  married  woman  cannot  enter  into 
a  contract  of  suretyship  or  become  responsible  for  the  debts  of 
her  husband.  If  the  partnership  with  her  husband  is  not  a  mere 
scheme  to  evade  the  law  which  forbids  her  to  enter  into  contract 
of  suretyship,  then  undoubtedly  such  a  partnership  is  legal. 

The  precise  question  has  been  decided  by  the  Court  of  Appeals 
in  the  case  of  Butler  v.  Frank,  7  Ga.  App.  655,  wherein  the  court 
said: 

"A  married  woman  may  contract  to  become  and  actually  be- 
come a  member  of  a  partnership  with  her  husband  or  other  per- 
sons ;  and  if  she  does  enter  into  such  a  partnership  arrangement 
(unless  it  is  merely  colorable  and  devised  for  the  purpose  of  evad- 
ing the  law),  she  is  bound  for  the  partnership  debts." 


INDORSEMENT. 


Liability  of  Indorser. 

Is  an  indorser  liable  to  the  same  extent  as  the  maker  of  a  note? 

Section  4279  of  the  Code,  governing  the  liability  of  an  indorser, 
is  as  follows : 

"In  ordinary  indorsements  the  contract  of  the  indorser  is  to  pay 
the  money  if  the  parties  to  the  instrument  primarily  liable  thereon 
fail  to  pay  according  to  the  terms  thereof ;  hence,  if  there  are 
several  indorsers,  each  is  liable  to  subsequent  ones  in  the  order  of 
their  indorsements." 

It  will  be  noted  that  the  indorser's  contract  is  to  pay,  provided 
the  other  parties  primarily  liable  on  the  paper  do  not.  But.  it 
will  be  seen  by  reference  to  §  4283  that  an  indorser  may  be  sued 
in  the  same  action  with  the  maker.  Of  course,  where  suit  is 
entered  against  maker  and  indorser,  and  judgment  is  obtained, 
the  execution  can  be  levied  on  the  property  of  either  maker  or 


352  PARK'S  BANKING  LAW  OF  GEORGIA. 

indorser  as  may  be  most  convenient  to  the  plaintiff  and  the  levy- 
ing officer.  In  other  words,  it  is  not  necessary  to  exhaust  the 
property  of  the  maker  before  levying  on  that  of  the  indorser. 


Indorser  May   Be   Sued  Without  Joining   Maker. 

.    Can  a  suit  be  maintained  against  the  indorser  of  a  note  without  suing 
the  maker? 

I  quote  from  Daniel  on  Negotiable  Instruments : 

"As  a  general  rule,  the  holder  may  sue  all  the  prior  parties  on 
the  bill  or  note,  but  not  any  subsequent  party.  Thus  a  payee 
may  sue  the  acceptor  or  maker.  An  indorsee  may  sue  the  ac- 
ceptor or  maker,  and  all  prior  indorsers.  By  the  general  law 
merchant  the  indorser  of  a  negotiable  instrument  is  bound  in- 
stantly, and  may  be  sued  after  maturity,  upon  demand  and  notice. 
But  by  the  statutes  of  some  of  the  States  the  maker  must  be  first 
sued,  and  his  property  first  subjected."  Daniel  on  Negotiable 
Instruments  (6th  Ed.),  §  1202. 

Quoting  again  from  the  same  author,  §  1203 : 

"At  common  law,  the  holder  of  a  bill  or  note  might  commence 
and  prosecute  several  actions  against  each  of  the  prior  parties  at 
the  same  time;  and  an  action  instituted  against  one  would  not 
preclude  any  other  remedy  against  the  others.  But  satisfaction 
by  any  one  would  discharge  all  from  liability  to  the  plaintiff  as  to 
the  principal  sum.  But  by  statute  in  many  of  the  States  an  action 
may  be  maintained  and  judgment  given  jointly  against  all  the 
parties  to  a  negotiable  instrument,  whether  makers,  drawers,  in- 
dorsers, or  acceptors,  or  against  any  one,  or  any  intermediate 
number  of  them." 

Quoting  from  the  Cyclopedia  of  Law  and  Procedure : 

"At  common  law  the  holder  of  a  bill  might  bring  several  simul- 
taneous actions  against  all  or  any  of  the  prior  parties  liable  to 
him.  He  could  not,  however,  maintain  a  joint  action  against  par- 
ties severally  liable.  By  statute  in  many  of  the  United  States, 
in  England,  and  in  Canada  the  holder  of  a  bill  of  exchange  or 
promissory  note  may  bring  suit  against  the  drawer  or  maker,  ac- 
ceptor or  indorser,  any  or  all,  in  the  same  action."  8  Cyc.,  p.  92. 

The  rule  laid  down  by  these  authorities  seems  to  be  the  rule  in 
Georgia.  I  quote  from  a  decision  of  the  Supreme  Court : 

"Upon  the  acceptance  of  a  bill  of  exchange,  the  acceptors  be- 
come primarily  liable  to  the  payee  as  makers  and  the  drawers  sec- 
ondarily liable  as  indorsers.  On  nonpayment  he  may  sue  either  or 
both."  Davis  v.  Baker,  71  Ga.  33. 


OPINIONS  OF  THE:  GENERAL  COUNSEL.  353 

Our  statute  authorizes  the  bringing  of  suit  against  the  maker 
and  indorser  in  one  action  in  the  county  in  which  the  maker  re- 
sides, but  it  does  not  require  that  suit  should  first  be  entered 
against  the  maker  or  that  the  maker  and  indorsers  must  be  sued 
jointly.  I  am  of  opinion,  therefore,  that  suit  can  be  maintained 
against  the  indorser  without  joining  the  maker. 


Bank  Has  No  Power  to  Indorse  for  Accommodation. 

Can  a  bank  indorse  for  an  individual?     If  so,  can  it  be  done  without 
the  written  authority  from  the  directors? 

A  bank  has  no  right  to  indorse  for  accommodation  either  with 
or  without  the  authority  of  the  directors. 


Indorsement  by  Bank  (to  Transfer  Title)  Warrants  All  Prior 

Indorsements. 

Where  a  bank  places  its  indorsement  on  the  back  of  a  check  which  it  has 
cashed,  does  it  guarantee  all  previous  indorsements,  or  only  the  signature 
of  its  immediate  indorser? 

I  quote  from  Tiedeman  on  Commercial  Paper,  §  259 : 
"The  indorser  also  warrants  the  genuineness  of  all  the  signa- 
tures to  the  paper.  It  has  also  been  doubted  whether  the  in- 
dorser warrants  the  genuineness  of  the  prior  indorsements.  But 
this  is  not  the  conclusion  of  the  authorities.  Inasmuch  as  the  in- 
dorser also  warrants  that  he  has  a  perfect  title  to  the  paper  by 
indorsement,  and  is  liable  if  his  title  proves  defective ;  and  since 
no  title  passes  on  a  forged  indorsement,  it  follows  as  a  necessary 
consequence  that  the  indorser  must  warrant  the  genuineness  of 
the  prior  indorsements." 


Indorsement  "Pay  to  Any  Bank  or  Banker  or  Order"  Is  In- 
dorsement for  Collection. 

A  check  drawn  on  a  bank  of  another  city  is  left  with  a  bank  for  collec- 
tion. It  is  stamped  by  the  bank  with  which  it  is  left,  "pay  to  any  bank 
or  banker  or  order,  previous  indorsements  guaranteed."  Before  being 
mailed,  however,  the  person  leaving  it  for  collection  calls  for  it,  and  it  is 
delivered  to  him  without  the  stamped  indorsement  being  erased.  He  takes 
the  check  to  a  neighboring  town,  and  it  is  cashed  by  a  merchant.  This 
merchant  deposits  the  check  with  his  bank  for  collection,  and  it  is  re- 
turned, marked  "no  account  with  us"  by  the  bank  on  which  it  is  drawn. 
The  check  is  not  protested.  It  is  afterwards  returned  to  the  drawee  bank 
and  protested.  Is  the  bank  liable  on  this  indorsement  to  the  merchant  who 
cashed  the  check? 

The  only  theory  upon  which  the  bank  could  be  held  liable  is 
that  the  merchant  cashed  the  check  on  the  faith  of  its  indorsement, 
23 


354  PARK'S  BANKING  LAW  o$  GEORGIA. 

and  is  a  bona  fide  holder  without  notice.  I  do  not  think  he  can 
claim  to  be  such  holder  under  the  circumstances  detailed  in  the 
question.  The  fact  that  the  check  remains  in  the  hands  of  the 
original  payee  would  seem  to  be  suffcient  to  suggest  that  the  in- 
dorsement of  the  bank  could  not  have  been  intended  as  a  guar- 
antee of  the  payment  of  the  check.  The  circumstances  are  suf- 
ficient to  put  any  prudent  man  on  inquiry  as  to  why  the  bank 
indorsed  the  check,  it  not  being  drawn  on  such  bank  and  its 
indorsement  not  being  necessary  for  the  negotiation  of  the  check. 
Besides,  the  form  of  the  indorsement  suggests  that  it  was  in- 
tended as  an  indorsement  for  collection,  and,  therefore,  limited 
to  that  purpose,  and  was  not  intended  as  a  full  indorsement,  mak- 
ing the  bank  liable  on  the  paper.  Similar  indorsements  have  been 
held  sufficient  to  carry  on  their  face  notice  that  the  indorsement 
is  intended  for  collection  only.  The  Supreme  Court  of  Arkansas 
in  the  case  of  Johnston  <u.  Schnabaum,  109  S.  W.  1163,  held 
that  "an  indorsement  by  a  bank  on  a  note  to  pay  to  the 
order  of  any  bank  or  banker  shows  on  its  face  that  it  passes 
title  for  collection  only" ;  and  the  Court  of  Civil  Appeals  of 
Texas,  in  the  case  of  Gregory  v.  Sturgis  National  Bank,  71  S.  W. 
66,  held  that  an  indorsement,  "pay  any  bank  or  banker  or  order" 
shows  that  the  bank,  the  holder  of  the  draft,  held  the  draft  merely 
for  collection,  or  at  least  was  sufficient  to  put  the  drawee  on 
inquiry  as  to  the  bank's  ownership  of  the  same. 

Certainly,  where  the  check  was  cashed  by  a  merchant  under  the 
circumstances  stated  in  the  question,  it  would  seem  that  the  form 
of  the  indorsement  would  put  the  merchant  on  inquiry,  and  that 
he  could  not  be  held  to  be  a  bona  fide  holder  without  notice. 

A  check,  payment  of  which  is  refused  by  the  bank  on  which 
it  is  drawn,  must  be  protested  at  once  in  order  to  bind  indorsers. 
There  is  no  authority  for  presenting  a  check  the  second  time  in 
order  that  protest  may  be  made.  Therefore,  the  protest  made  on 
the  second  presentation  is  entirely  without  effect.  However, 
unless  the  paper  was  made  payable  to  the  bank  and  its  indorse- 
ment was  necessary  in  order  to  transfer  title,  protest  of  the  paper 
would  not  be  required  in  order  to  bind  it  as  an  indorser,  protest 
being  required  only  for  the  purpose  of  binding  parties  whose 
signatures  are  necessary  in  negotiation  of  the  paper. 

Regardless  of  the  question  of  whether  or  not  the  bank  would  be 
released  by  the  failure  to  protest,  which  as  indicated  would  de- 
pend on  whether  its  indorsement  was  necessary  to  transfer  title 


OPINIONS  OE  THE  GENERAL  COUNSEL.  355 

to  the  paper,  I  do  not  think  it  would  be  liable  to  the  merchant, 
because  the  form  of  the  indorsement  clearly  indicated  that  it  was 
not  intended  as  an  unrestricted  indorsement. 


Note  Indorsed  in  Blank  Is  Payable  to  Bearer,  and  Holder 
May  Sue  in  His  Own  Name. 

Where  a  note  is  payable  to  the  order  of  a  named  person  and  is  indorsed 
by  him  in  blank,  can  a  subsequent  holder  sue  on  the  note  in  his  own 
name? 

Where  a  paper  is  payable  to  the  order  of  a  named  person,  and 
is  indorsed  by  him  in  blank,  it  is  payable  to  bearer  and  passes 
freely  from  hand  to  hand,  and  the  holder  of  such  an  instrument 
can  bring  suit  on  the  same  in  his  own  name.  This  has  been  de- 
cided by  our  Supreme  Court  in  more  than  one  case.  I  quote  from 
Habersham  v.  Lehman,  63  Ga.  383  : 

"Where  a  promissory  note  is  payable  to  a  named  person  or 
order,  or  to  the  order  of  a  named  person,  and  is  indorsed  in 
blank,  it  is  then,  until  the  blank  is  filled,  payable  to  the  holder, 
and  any  holder  may  receive  payment  or  sue  and  collect." 

The  case  of  Heard  v.  DeLoach,  105  Ga.  500,  is  to  the  same 
effect. 


Check  Indorsed  in  Blank  Is  Payable  to  Bearer  Notwithstand- 
ing Subsequent  Limited  Indorsement. 

A  check  drawn  by  P  in  favor  of  L  is  indorsed  in  blank  by  the  payee. 
It  also  contains  an  indorsement  by  X  as  follows :  "Pay  F,  bank  or  order." 
Was  the  bank  on  which  the  check  was  drawn  authorized  to  pay  the  check 
upon  the  blank  indorsement  of  the  payee  or  was  its  right  to  do  so  re- 
stricted by  reason  of  the  subsequent  indorsement  stamped  thereon? 

The  precise  question  seems  to  have  been  decided  by  the  Su- 
preme Court.  I  quote  from  the  case: 

"A  negotiable  note  being  indorsed  in  blank  (the  blank  still  un- 
filled), any  holder  may  sue  the  maker.  A  full  indorsement  by 
a  person  other  than  the  payee,  will  not  hinder  the  blank  indorse- 
ment by  the  payee  from  operating  as  evidence  of  title  in  the  pres- 
ent holder."  Habersham  v.  Lehman,  63  Ga.  380  ( 1 ) . 

The  court  also  says  in  discussing  the  question : 

"Where  a  promissory  note  is  payable  to  a  named  person  or" 
order,  or  to  the  order  of  a  named  person,  and  is  indorsed  in  blank, 
it  is  then,  until  the  blank  is  filled,  payable  to  the  holder,  and  any 
holder  may  receive  payment,  or  sue  and  collect.     The  payee's 


356  PARK'S  BANKING  LAWS  OF  GEORGIA. 

order  to  pay  to  any  holder  is  not  revoked  or  canceled  by  the 
order  of  some  other  person  to  pay  to  a  particular  individual." 

Checks  are  negotiable  instruments  and  are  affected  by  all  the 
rules  governing  commercial  paper.  The  effect  of  a  blank  en- 
dorsement of  a  check  is  the  same  as  the  blank  endorsement  of  a 
note.  The  rule  laid  down  by  the  Supreme  Court  of  Georgia  and 
above  quoted  seems  to  be  universally  recognized.  I  quote  again 
from  Brady  on  the  Law  of  Bank  Checks,  p.  56: 

"A  blank  indorsement  makes  the  instrument  so  indorsed  trans- 
ferable by  delivery,  without  the  holder's  indorsement,  in  the 
same  manner  as  an  instrument  payable  to  bearer.  When  an  in- 
strument is  payable  to  bearer  or  after  it  is  once  indorsed  in  blank, 
a  subsequent  indorsement  to  a  particular  person,  or  order,  does 
not  limit  its  tranferability.  An  instrument,  being  once  made 
payable  to  bearer  may,  notwithstanding  a  subsequent  special  in- 
dorsement, still  be  transferred  by  delivery  without  the  indorse- 
ment of  the  holder." 

Under  these  authorities,  I  do  not  think  there  can  be  any  doubt 
but  that  the  bank  was  authorized  to  pay  the  check  to  the  holder. 


INSTALLMENT  LOANS. 


Not  Usurious  When  Made  by  Savings  Bank  Which  Pays  In- 
terest to  Depositors,  and  Whose  Deposits  Are  Not  Subject 
to  Check. 

Where  a  savings  bank,  which  pays  interest  to  depositors  and  whose 
deposits  are  not  subject  to  check,  makes  a  loan  on  real  estate,  calculates 
interest  at  eight  per  cent,  for  the  whole  period,  and  divides  the  payments 
of  both  principal  and  interest  thus  aggregated  for  the  entire  term  into 
monthly,  quarterly,  or  annual  installments,  is  the  transaction  usurious? 

Section  2878  Park's  Ann.  Code  provides  that  building  and  loan 
associations  and  other  like  associations  may  lend  money  accord- 
ing to  the  plan  outlined  in  the  question.  Section  2881  of  the 
Code,  which  is  in  the  same  article  as  §  2878,  provides  that, 

"All  the  provisions  of  this  article  are  to  apply  to  all  savings 
institutions  which  pay  interest  to  depositors,  and  whose  deposits 
are  not  subject  to  check." 

This  section  was  construed  in  the  case  of  Union  Savings  Bank 
&  Trust  Company  v.  Dottenheim,  107  Ga.  606^  where  it  was  held 
by  the  Supreme  Court  that  the  Union  Savings  Bank,  being  a  sav- 
ings institution  which  paid  interest  to  depositors  and  whose  de- 


OPINIONS  otf  THE  GENERAL  COUNSEL.  357 

posits  were  not  subject  to  check,  could  charge  and  collect  interest 
in  the  manner  described. 

I  am,  therefore,  of  the  opinion  that  such  a  bank  can  make  loans 
as  outlined  under  the  provisions  of  §  2881,  and  that  loans  so  made 
are  not  usurious  or  in  any  sense  invalid. 


INSURANCE. 


Any  Change  in  Title  of  Property  Insured  Without  Notice  to 
Insurance  Company  Voids  the  Policy. 

A  merchant  borrows  from  the  bank  and  as  security  gives  a  receipt  for 
merchandise.  He  delivers  to  the  bank  an  insurance  policy  made  out  in 
his  favor  with  a  written  order  to  the  insurance  company  to  pay  over  the 
amount  to  the  bank  in  case  of  fire.  No  "loss  clause"  is  attached  to  the 
policy.  Would  this  transaction  affect  the  insurance? 

I  think  it  would  unquestionably  void  the  policy.  As  I  under- 
stand the  transaction,  the  title  to  the  merchandise  is  transferred 
to  the  bank  as  security  for  the  loan.  Whether  this  be  regarded  as 
an  absolute  transfer  or  as  creating  a  lien  on  the  merchandise 
simply,  the  effect,  so  far  as  the  insurance  is  concerned,  would  be 
the  same.  The  policy  would  be  rendered  void.  The  rule  is  that 
any  change  in  the  title  to  the  property  insured  voids  the  policy. 
This  applies  not  only  to  an  absolute  sale,  but  to  a  sale  to  secure 
a  debt,  or  to  the  creation  of  a  simple  lien  on  the  insured  property. 


Wife  Witnessing  Transfer  of  Policy  Previously  Transferred 
to  Her  Is  Estopped  to  Claim  Proceeds  as  Against  Trans- 
feree. 

A  man  transferred  a  life  insurance  policy  to  a  bank  as  security  for  a 
loan.  His  wife,  who  was  his  business  partner,  attested  the  transfer  as  a 
witness,  and  benefitted  by  the  loan.  She  now  claims  the  policy  had  been 
transferred  to  her  before  the  loan  was  made.  Will  she  be  allowed  to  set 
up  this  old  transfer  or  is  she  estopped  by  having  witnessed  the  transfer 
to  the  bank? 

The  wife,  having  witnessed  the  transfer  of  the  insurance 
policy  by  her  husband  to  the  bank  and  having  received  the  benefit 
of"  that  transfer  in  the  further  extension  of  credit  to  the  firm 
of  which  she  was  a  member,  is  estopped  now  to  assert  a  previous 
transfer  of  the  policy  to  herself  or  to  claim  any  benefit  thereunder 
superior  or  antagonistic  to  the  transfer  to  the  bank.  I  quote : 


358  PARK'S  BANKING  LAW  OF  GEORGIA. 

"If  the  owner  or  a  person  having  an  interest  in  property  repre- 
sents another  as  the  owner,  or  permits  him  to  appear  as  such, 
or  as  having  complete  authority  over  it,  he  will  be  estopped  to 
deny  such  ownership  or  authority,  against  persons  who,  relying 
on  his  representations  or  silence,  have  purchased  or  acquired  an 
interest  in  the  property ;  and  generally  where  a  person  by  word  or 
conduct  voluntarily  induces  another  to  act  on  a  belief  in  the  ex- 
istence of  a  certain  state  of  facts,  he  will  be  estopped,  as  against 
him,  to  allege  a  different  state  of  facts."  Equitable  Mortgage  Co. 
v.  Butler,  105  Ga.  555. 

"One  who  attests  a  deed  knowing  its  contents,  cannot  after- 
wards stand  by  and  see  expensive  work  done  under  it  on  the 
premises,  making  no  objection,  and  then  assert  an  older  adverse 
title  in  himself,  and  recover  the  premises  in  opposition  to  the 
deed  to  which  his  attestation  gave  authenticity  and  credit.  He  is 
estopped."  Ga.  Pacific  Ry.  Co.  v.  Strickland,  80  Ga.  776  (2). 

"The  true  owner  of  property  may  estop  himself  by  his  conduct 
from  asserting  title  to  his  own  property,  as  when  he  stands  by  and 
allows  property  belonging  to  him  to  be  sold  to  an  innocent  pur- 
chaser for  value  as  the  property  of  another.  American  Mort- 
gage Co.  v.  Walker,  119  Ga.  341,  and  cit.  Or,  he  may  so  estop 
himself  by  attesting  a  deed,  of  the  contents  of  which  he  knows, 
made  by  a  person  who  has  no  title.  Ga.  Pac.  Ry.  Co.  v.  Strick- 
land, 80  Ga.  776.  The  negotiation  of  the  loan  from  Lewman  by 
Farrar  in  behalf  of  his  wife  and  his  attestation  of  her  deed  given 
to  secure  the  loan  would  estop  Farrar  from  asserting  title  in  his 
own  favor  as  against  Lewman,  assuming,  of  course,  Lewman's 
ignorance  of  the  true  title."  Equitable  Loan  &  Security  Co.  v. 
Lewman,  124  Ga.  190. 

"If  one  who  held  the  legal  title  to  land,  though  unrecorded, 
represented  that  the  title  was  in  another  person  who  appeared 
from  the  record  to  be  the  owner,  and  that  such  other  person  had 
the  right  to  sell  and  make  a  bond  for  title  to  the  land,  and  thus 
induced  an  innocent  purchaser  for  value,  in  reliance  on  such  rep- 
resentation, to  accept  a  bond  for  title  from  the  other  person,  to 
give  notes  for  the  purchase  money,  and  to  pay  some  or  all  of 
them,  the  person  so. acting  would  be  estopped  from  denying  the 
title  of  such  third  person."  Sewell  v.  Norris,  128  Ga.  824. 

The  principle  is  well  stated  in  §  4419  of  Park's  Ann.  Code : 

"A  fraud  may  be  committed  by  acts  as  well  as  words ;  and  one 
who  silently  stands  by  and  permits  another  to  purchase  his  prop- 
erty without  disclosing  his  title  is  guilty  of  such  a  fraud  as  estops 
him  from  subsequently  setting  up  such  title  against  the  pur- 
chaser." 

The  fact  that  the  claimant  is  a  married  woman  and  that  the 
policy  was  transferred  to  secure  the  debt  of  her  husband  makes 
no  difference.  While  there  are  certain  restrictions  on  the  right 
of  a  married  woman  to  contract,  and  while  her  property  may  not 


OPINIONS  of  THE  GENERAL  COUNSEL.  359 

be  taken  to  satisfy  her  husband's  debts,  she  may  nevertheless  be 
estopped  by  her  conduct.    I  quote  again  from  the  Supreme  Court : 

"This  is  not  a  case  in  which  can  be  applied  the  rule  that  any 
assumption  by  the  wife  of'the  husband's  debts  is  void.  While  her 
power  of  contracting  is  restricted  by  law,  yet  there  is  no  prin- 
ciple of  law  or  justice  that  will  tolerate  in  her,  any  more  than  in 
a  man,  the  perpetration  of  a  fraud.  Even  minors  may  be  estopped 
by  their  admissions  from  denying  the  truth  of  them,  or  by  their 
silence  when  the  circumstances  call  for  a  disclosure  of  their  claims 
or  their  rights,  provided  the  minor  has  arrived  at  those  years  of 
discretion  when  a  fraudulent  intent  could  be  reasonably  imputed 
to  him.  Whittington  v.  Wright,  9  Ga.  23.  A  married  woman 
has  no  legal  rights  that  can  exempt  her  from  this  rule  of  law  and 
justice.  Dunbar  v.  Mize,  53  Ga.  439  (2)  ;  Dotterer  v.  Pike,  60 
Ga.  42;  Archer  v.  Guill,  67  Ga.  195,  200;  Ruffin  v.  Paris,  75  Ga. 
654;  Henry  v.  McAllister,  99  Ga.  557."  Wolff  &  Happ  v. 
Hawes,  105  Ga.  153. 

"One  plea  of  the  defendant  averred,  that  she  employed  an 
attorney  to  examine  the  title,  and  that  the  wife  represented  to  him 
that  the  deed  made  by  her  to  her  husband  was  a  deed  of  gift  and 
not  one  of  sale,  and  that  he  was  induced  thereby  to  recommend 
to  the  defendant  that  the  husband  had  a  good  title  to  the  property, 
and  that  the  defendant  was  induced  by  such  recommendation  to 
make  the  purchase  from  the  husband,  and  that  the  plaintiffs,  who 
claimed  the  land  as  heirs  at  law  of  the  wife,  were  estopped  from 
setting  up  title  thereto  on  the  ground  that  the  deed  to  the  hus- 
band was  void  because  it  was  one  of  bargain  and  sale,  and  had  not 
been  allowed  by  the  Superior  Court  of  the  wife's  domicile.  Held, 
that  the  court  committed  no  error  in  refusing  to  strike  this  plea 
and  in  admitting  testimony  in  support  thereof."  Shackelford  v. 
Orris,  135  Ga.  29  (6). 

These  cases  appear  to  be  closely  in  point.  It  is  true  none  of  the 
cases  in  which  estoppels  were  invoked  related  to  policies  of  insur- 
ance, but  there  is  nothing  sacred  or  peculiar  about  an  insurance 
policy  which  would  differentiate  it  from  other  transactions.  In 
fact,  there  would  seem  to  be  less  reason  for  invoking  the  doctrine 
of  estoppel  where  real  estate  is  concerned  than  where  the  subject 
matter  of  the  contract  is  an  insurance  policy,  for  the  law  pro- 
vides for  the  recording  of  deeds  and  makes  such  record  notice 
to  all  the  world  .  As  I  understand  the  question,  there  was  noth- 
ing in  the  policy  which  was  transferred  to  the  bank  to  indicate 
that  there  had  been  a  previous  assignment  or  that  the  transferrer 
did  not  have  full  and  complete  control  over  the  same. 


360  PARK'S  BANKING  LAW  OF  GEORGIA. 

INTEREST. 


Method  of  Calculating  When  Partial  Payments  Are  Made. 

What  is  the  proper  method  for  calculating  interest  where  partial  pay- 
ments are  made? 

Section  3433  of  Park's  Ann.  Code,  which  covers  the  subject,  is 
as  follows: 

"When  a  payment  is  made  upon  any  debt,  it  shall  be  applied 
first  to  the  discharge  of  any  interest  due  at  the  time,  and  the  bal- 
ance, if  any,  to  the  reduction  of  the  principal.  If  the  payment 
does  not  extinguish  the  interest  then  due  no  interest  shall  be 
calculated  on  such  balance  of  interest,  but  only  on  the  principal 
amount  up  to  the  time  of  the  next  payment." 

It  is  suggested  that  this  method  of  calculating  interest  is  some- 
times called  compounding  interest  and  is  objected  to  for  that 
reason.  I  quote  from  the  case  of  Wade  v.  Powell,  31  Ga.  3 : 

"It  is  not  compound  interest  to  add  interest  on  the  balance  up 
to  the  credit,  and  deduct  credit  from  the  sum  of  principal  and  in- 
terest, and  then  to  add  interest  on  balance,  etc.,  when  the  credit 
exceeds  the  interest,  etc. ;  but  such  rule  is  the  one  prescribed  by 
the  statute." 

This  case  fully  settles  the  legality  of  this  method  and  decides 
the  precise  point  raised. 


Computing  on  Basis  of  Thirty  Days  to  Month  and  Twelve 
Months  of  Thirty  Days  Each  to  Year  Is  Allowable. 

Are  banks  authorized  to  calculate  interest  on  the  basis  of  thirty  days  to 
the  month  and  three  hundred  and  sixty  days  to  the  year? 

It  is  the  custom  among  bankers,  for  the  sake  of  convenience,  to 
compute  interest  at  thirty  days  to  the  month  and  twelve  months 
to  the  year,  and  this  custom  is  recognized  in  Georgia.  I  quote 
from  a  decision  by  the  Supreme  Court : 

"The  taking  of  interest  for  a  portion  of  a  year,  computed  on 
the  principle  that  a  year  consists  of  360  days,  or  twelve  months 
of  thirty  days  each,  is  not  usurious,  provided  this  principle  is 
resorted  to  in  good  faith  as  furnishing  an  easy  and  practical  mode 
of  computation  and  not  as  a  cover  for  usury."  Patton  v.  Bank  of 
Lafayette,  124  Ga.  965. 


OPINIONS  of  THE  GENERAL  COUNSEL.  361 

Estate  of  Decedent  Not  Exempt  from  Interest. 

The  maker  of  a  note  bearing  interest  from  maturity  dies  shortly  after 
its  maturity.  Is  the  administrator  of  the  maker  relieved  from  paying  in- 
terest on  the  note  for  twelve  months  ? 

I  know  of  no  provision  of  law  which  would  authorize  the  ad- 
ministrator to  deduct  twelve  months'  interest.  The  only  provision 
relieving  an  administrator  from  the  payment  of  interest  is  that 
found  in  §  4077  of  Park's  Ann.  Code.  This  section  lays  down 
the  rules  to  be  used  as  the  basis  of  settlement  between  dis- 
tributees and  administrators.  It  is  provided  in  this  section  that  in 
the  settlement  of  estates  "no  interest  shall  be  charged  either  way 
for  the  first  year,  as  one  year  is  now  allowed  by  law  for  the  col- 
lection of  assets  and  to  ascertain  the  indebtedness  of  an  estate." 
But  this  provision  is  not  applicable  to  the  case  stated.  If  the  note 
bears  interest  from  maturity,  the  holder  is  entitled  to  collect  in- 
terest from  maturity. 


KITING. 


Definition  of 

What  is  "kiting"? 

The  word  seems  to  be  used  in  several  different  senses.  It  is 
sometimes  understood  to  mean  the  lending  of  its  credit  by  one 
commercial  firm  to  another.  Thus  one  friendly  firm  may  borrow 
from  another  its  check,  draft,  note,  or  indorsement  to  tide  over 
an  immediate  necessity  for  money,  the  other  firm,  when  occasion 
arises,  returning  the  favor. 

In  Georgia,  we  generally  use  the  term  as  meaning  the  mailing 
out  of  checks  by  a  person  who  has  no  account  with  the  bank  on 
which  the  checks  are  drawn,  or  checks  for  an  amount  in  excess 
of  his  balance,  with  a  view  to  making  up  the  amount  by  the 
time  the  checks  are  presented.  Sometimes  it  goes  even  further 
than  this,  as  for  example,  where  a  man  deposits  in  a  bank  a  check 
on  another  bank  in  which  he  has  no  funds,  intending  to  make 
up  the  amount  with  the  drawee  bank  before  the  check  can  be 
presented.  In  short,  the  term  seems  to  cover  almost  every  variety 
of  fictitious  credit  built  up  by  means  of  checks,  drafts,  notes,  etc., 
drawn  against  deposits  which  do  not  exist  or  which  do  not  repre- 
sent bona  fide  obligations. 


362  PARK'S  BANKING  LAW  OF  GEORGIA. 

LANDLORD'S  LIEN. 


Indorsement  of  Rent  Note  Transfers  the  Landlord's  Lien. 

Does  the  indorsement  of  a  rent  note  transfer  the  landlord's  lien? 

It  was  provided  by  the  Act  of  1882,  codified  as  §  3343  Park's 
Ann.  Code,  as  follows  : 

"Whenever  any  contract  for  rent  is  evidenced  by  writing  and 
is  transferred  by  written  assignment  before  the  maturity  of  the 
crops  on  the  lands  rented,  the  special  lien  in  favor  of  landlords 
shall,  on  the  maturity  of  the  crops,  arise  in  favor  of  the  transferee 
of  such  rent  contract  in  the  same  manner  as  it  would  have  done 
in  favor  of  the  landlord  had  no  transfer  been  made." 

And  by  the  Act  of  1899,  codified  as  §§  3345  and  3346  of  that 
Code,  it  is  provided : 

"All  transfers  and  assignments  of  rent  notes,  mortgage  notes, 
and  other  such  evidences  of  indebtedness,  secured  either  by  con- 
tract lien  or  out  of  which  a  lien  springs  by  operation  of  law,  shall 
be  sufficiently  technical  and  valid  where  such  transfer  or  assign- 
ment plainly  seeks  to  pass  the  title  to  any  of  such  papers  in  writ- 
ing from  one  person  to  another." 

"Upon  all  such  transfers  or  assignments  of  any  such  rent  note, 
mortgage  note,  or  other  such  evidence  of  indebtedness  as  men- 
tioned in  the  preceding  section,  such  transfer  or  assignment  shall 
carry  together  with  the  title  thereof  to  such  transferee  or  assignee 
also  the  lien  connected  with  the  same  without  naming  or  spe- 
cifically transferring  the  lien,  so  that  the  effect  of  such  transfer 
or  assignment  will  be  to  completely  and  fully  carry  the  lien  as  a 
necessary  incident  thereof." 

There  can  be  no  doubt  under  these  sections  of  the  Code  that  an 
indorsement  of  a  rent  note  transfers  the  landlord's  lien. 


LANDLORD'S  LIEN  FOR  SUPPLIES 
FURNISHED. 


Whether  Such  Lien  Exists  Where  Supplies  Furnished  by 
Another  on  Order  of  Landlord  Depends  on  the  Circum- 
stances. 

A  landlord  gives  the  manager  of  a  fertilizer  company,  in  which  he 
himself  is  a  stockholder,  a  verbal  order  to  supply  his  tenant  with  fer- 
tilizers necessary  to  make  the  crop.  The  company  takes  a  note  signed 
by  the  tenant  but  not  by  the  landlord.  The  landlord,  however,  considers 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  363 

himself  liable  and  will  pay  the  note  at  maturity  if  the  tenant  does  not. 
Before  the  fertilizer  note  becomes  due,  it  develops  that  a  supply  merchant 
has  a  duly  executed  and  recorded  crop  mortgage  on  the  tenant's  crop. 
Can  the  landlord  pay  the  fertilizer  note,  have  it  assigned  to  himself,  and 
collect  it  out  of  the  crop  as  against  the  mortgage  of  the  supply  merchant? 

The  only  question  involved  on  the  state  of  facts  detailed  is 
whether,  under  those  facts,  the  landlord  had  a  lien  on  the  crop 
for  supplies  furnished.  Of  course  fertilizers  come  within  the 
designation  of  supplies  for  the  furnishing  of  which  the  landlord 
has  a  lien.  And  if  the  landlord  has  such  a  lien,  it  is  of  course  su- 
perior to  a  mortgage  on  the  crop  held  by  a  third  person.  The 
question,  therefore,  is :  Has  the  landlord  a  lien  under  the  facts 
set  out?  It  is  well  settled  by  the  courts  of  this  State  that  a  land- 
lord has  a  lien  on  the  tenant's  crop  only  for  supplies  which  he 
has  furnished  as  landlord. 

If,  therefore,  the  landlord  in  this  case  had  the  fertilizer  fur- 
nished the  tenant  merely  as  agent  of  the  fertilizer  company,  in 
which  he  was  a  stockholder,  he  would  have  no  lien  therefor  on 
the  crop,  even  if  he  should  pay  the  note  and  have  the  same  as- 
signed to  him.  This  has  been  held  by  the  Supreme  Court  in  the 
case  of  Swann  v.  Morris,  83  Ga.  143,  the  headnote  of  which  is 
as  follows : 

"Where  a  landlord,  as  agent,  sold  to  his  tenant  guano  and  took 
a  note  therefor  payable  to  his  principal,  and  at  maturity  paid  the 
note  because  the  tenant  did  not  do  so  (this  being  required  by  his 
contract  with  his  principal),  he  was  not  entitled  to  foreclose  a  lien 
for  the  guano  as  landlord." 

I  understand  from  the  question,  however,  that  the  landlord 
did  not,  as  agent  for  the  fertilizer  company,  sell  the  fertilizer  to 
his  tenant,  but  rather  that  he  made  arrangements  with  "the  tenant 
to  furnish  the  fertilizer  to  him  and  that  the  landlord  originally 
intended  to  be  responsible  to  the  fertilizer  company  for  the  pur- 
chase. If  this  is  true,  I  think  the  landlord  has  a  lien  which  is 
superior  to  the  merchant's  crop  mortgage.  If  the  landlord  was  a 
mere  surety  for  the  tenant,  he  would  not  have  a  lien ;  but  if  the 
landlord,  and  not  the  tenant,  was  the  real  purchaser  of  the  fer- 
tilizer, the  landlord  undoubtedly  has  a  lien  on  the  crop  for  the 
amount.  I  quote  from  the  case  of  Scott  v.  Pound,  61  Ga.  579, 
which  supports  this  view: 

"In  order  for  a  landlord  to  have  a  lien  upon  his  tenant's  crop 
for  supplies,  etc.,  the  landlord  must  furnish  the  articles,  and  not 
merely  become  the  tenant's  surety  for  the  price  to  some  other 
person  by  whom  they  are  sold  to  the  tenant.  The  landlord  may 
furnish  them  directly  from  his  own  stores,  or  may  order  them 


364  PARK'S  BANKING  LAW  OF  GEORGIA. 

from  others  on  his  credit,  and  have  them  delivered  with  or 
without  passing  through  his  hands.  .If  he  is  the  real  purchaser 
for  the  tenant,  the  case  is  one  for  a  lien,  even  though  the  joint 
and  several  note  of  landlord  and  tenant  be  given  for  the  price. 
But  if  the  tenant  is  the  real  purchaser  in  the  first  instance,  not 
deriving  title  through  the  landlord,  there  is  no  lien.  What  the 
truth  of  the  matter  is,  in  its  substance  and  reality,  is  a  question 
for  the  jury." 

This  case  was  followed  in  the  case  of  Brimberry  v.  Mansfield, 
86  Ga.  792;  Rodgers  v.  Black,  99  Ga.  139,  and  Henderson  v. 
Hughes,  4  Ga.  App.  52.  I  quote  the  first  headnote  in  the  last  case 
cited  as  being  an  exceptionally  clear  statement  of  the  law : 

"While  a  landlord  has  no  lien  for  supplies  furnished  by  another 
to  his  tenant,  and  cannot  acquire  a  lien  by  voluntarily  assuming, 
without  the  consent  of  the  tenant,  liability  for  supplies  to  be  fur- 
nished, nor  obtain  a  lien  for  any  preexisting  debt  for  supplies,  nor 
as  surety  for  payment  of  his  tenant's  debt  for  supplies,  still  he 
is  entitled  to  his  lien  for  supplies  where,  at  the  request  or  with 
the  consent  of  the  tenant,  he  directs  the  furnishing  of  supplies 
to  the  tenant  by  an  agent,  and  assumes  sole  liability  for  the  debt 
thus  created.  In  such  case  the  authority  to  sell  to  the  tenant, 
given  by  the  landlord  to  the  merchant,  is  an  original  undertaking, 
and  not  an  agreement  to  pay  the  debt  of  another,  and  the  sup- 
plies are  indirectly  furnished  by  the  landlord,  through  the  mer- 
chant as  his  agent,  instead  of  being  directly  delivered  by  his 
hands." 

In  view  of  these  authorities,  I  think  that  if  the  landlord  had  the 
fertilizer  furnished  at  the  request  or  with  the  consent  of  the 
tenant  and  that  if  he  intended  from  the  first  to  be  liable  to  the 
company,  he  would  have  a  lien,  and  upon  paying  the  note  could 
foreclose  such  lien  as  against  the  crop  mortgage ;  but  if  the  land- 
lord acted  merely  as  the  agent  of  the  company  in  selling  the  fer- 
tilizer or  if  he  simply  agreed,  after  the  tenant  made  the  note,  to 
pay  it,  in  case  the  tenant  did  not,  he  did  not  have  a  lien  upon  the 
tenants'  crop,  and  the  merchant  could  enforce  his  mortgage. 


LEGAL  TENDER. 


Fractional  Currency  as. 

To  what  extent  is  fractional  currency  legal  tender? 
I  quote  from  the  statutes  of  the  United  States: 

"The  present  silver  coins  of  the  United  States  of  smaller  de- 
nominations than  one  dollar  shall  hereafter  be  a  legal  tender  in  all 


OPINIONS  OF  THE;  GENERAL,  COUNSEL.  365 

sums  not  exceeding  ten  dollars  in  full  payment  of  all  dues  public 
and  private."  Act  of  Congress,  June  9,  1879,  21  Stat.  L.  8, 
amending  Rev.  St.  §  3586,  U.  S.  Comp.  Stat.  §  6573. 

"The  minor  coins  of  the  United  States  shall  be  a  legal  tender, 
at  their  nominal  value  for  any  amount  not  exceeding  twenty-five 
cents  in  any  one  payment."  U.  S.  Rev.  St.  §  3587,  U.  S.  Comp. 
Stat.  §  6574. 

By  minor  coins  is  meant,  as  I  understand  it,  nickels  and  pennies. 


LICENSE  TAX. 


State  Bank  Subject  to  and  Must  Register  with  the  Ordinary. 

Is  a  bank  required  to  register  with  the  ordinary  of  the  county  and  to 
pay  the  ordinary  a  fee  of  $1.00  for  such  registration? 

State  banks  are  required  to  register  with  the  ordinary.  Section 
950  of  Park's  Ann.  Code  provides  for  a  license  tax  on  all  busi- 
ness corporations.  This  section  applies  to  banks.  Section  978 
of  the  Code  provides  that  before  persons  upon  whom  an  occupa- 
tion tax  is  levied  shall  be  authorized  to  carry  on  business  they 
shall  go  before  the  ordinary  of  the  county  and  register  their 
names,  the  business  they  propose  to  engage  in  and  the  place  where 
it  is  to  be  conducted,  and  that  the  tax  levied  shall  then  be  paid 
to  the  tax  collector.  There  seems  to  be  no  doubt  that  this  law 
applies  to  banks,  and  that,  therefore,  they  are  required  to  register. 

So  far  as  I  am  able  to  ascertain,  there  is  no  express  provision 
of  law  authorizing  the  ordinaries  to  charge  a  fee  of  $1.00  for  this 
registration.  I  understand,  however,  that  the  ordinaries  generally 
over  the  State  are  charging  this  fee,  and  that  the  banks  are  pay- 
ing it.  The  ordinaries  claim  that  they  get  their  authority  to 
charge  this  registration  fee  by  analogy  to  the  Corporation  Com- 
missioner Act,  which  provides  a  like  fee  to  be  paid  to  the  Sec- 
retary of  State  for  recording  the  return  made  under  that  act. 
I  do  not  think  that  this  law  would  give  the  ordinaries  the  right 
to  charge  the  fee,  but  they  are  undoubtedly  entitled  to  some  com- 
pensation for  the  service.  The  law  fixing  the  fees  of  ordinaries 
provides  that  for  every  service  required  of  them  for  which  no 
fees  are  specified,  the  same  fees  shall  be  allowed  them  as  are  al- 
lowed clerks  of  the  superior  courts  for  similar  services,  or  for  a 
like  amount  of  labor.  Under  this  provision,  the  ordinaries  could 
doubtless  collect  a  reasonable  fee  for  this  service,  and  the  amount 
they  are  charging  is  probably  a  reasonable  fee. 


366  PARK'S  BANKING  LAW  of  GEORGIA. 

LIENS. 


Senior  Contract  Liens  on  Personal  Property  Not  Divested 
by  Judicial  Sale. 

Does  a  sale  of  personal  property  under  execution,  properly  levied  and 
advertised,  divest  senior  liens? 

Such  a  sale  does  not  divest  senior  contract  liens.  I  quote 
§  3274  of  Park's  Ann.  Code : 

"Property  mortgaged  may  be  sold  under  other  process,  subject 
to  the  lien  of  the  mortgage.  If  the  mortgage  is  foreclosed,  the 
mortgagee  may  place  his  execution  in  the  hands  of  the  officer 
of  the  law  making  the  sale,  and  cause  the  title  unincumbered  to  be 
sold,  and  claim  the  proceeds  according  to  the  date  of  his  lien." 

I  quote  also  §  3292 : 

"If  a  mortgage  on  realty  or  personalty  is  not  foreclosed,  and 
the  equity  of  redemption  is  levied  on  by  other  fi.  fas.  by  consent 
of  the  mortgagor  and  mortgagee  and  the  plaintiff  in  the  fi.  fa. 
levied,  the  entire  estate  may  be  sold,  and  the  mortgagee  claim 
under  his  lien  in  the  same  manner  as  if  his  mortgage  were  fore- 
closed." 

From  these  sections  it  will  be  seen  that  the  property  may  be 
levied  on  and  sold  subject  to  the  mortgage.  And  it  is  provided 
by  §  3275  that  in  such  event  the  mortgagee,  by  filing  with  the 
levying  officer,  prior  to  the  sale,  an  affidavit,  giving  the  amount 
due  on  the  mortgage  and  stating  that  he  apprehends  the  loss  of 
the  property  unless  a  bond  is  taken,  may  require  a  bond  to  be 
given  in  double  the  value  of  the  property,  conditioned  not  to  re- 
move the  property  out  of  the  State,  and  for  its  forthcoming  to 
answer  the  lien  of  the  mortgage. 

If  the  mortgage  creditor  knows  of  the  levy  and  sale,  he  may 
foreclose  his  mortgage  and  claim  the  proceeds  of  the  sale,  or  by 
consent  between  the  mortgagor  and  the  mortgagee  and  the  plain- 
tiff the  unincumbered  title  may  be  sold  and  the  mortgage  paid 
without  foreclosure.  If  no  arrangement  is  made,  and  the  mort- 
gage is  not  foreclosed,  the  purchaser  would  buy  the  property 
subject  to  the  lien  of  the  older  mortgage. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  367 

Holder  of  Junior  Lien  May  Take  Up  Prior  Debt  in  Order  to 
Levy  on  and  Sell  Property. 

How  can  the  holder  of  a  second  deed  to  secure  debt  realize  on  his  se- 
curity? 

The  Code  provides :  That  where  any  person  other  than  the 
holder  or  assignee  of  a  secured  debt  has  judgment  against  a  de- 
fendant who  has  an  interest  or  equity  in  the  property,  the  plaintiff 
may  take  up  the  debt  necessary  to  be  paid  by  the  defendant  in 
order  to  give  such  defendant  legal  title  to  the  property,  by  paying 
the  debt  with  interest  to  date  if  due,  and  interest  to  maturity  if 
not  due.  When  this  is  done,  a  conveyance  must  be  made  by  the 
holder  of  the  security  deed  to  the  defendant,  and  when  this  con- 
veyance is  recorded  the  property  may  be  levied  on  and  sold  as 
the  property  of  defendant,  the  proceeds  of  the  sale  being  applied, 
first,  to  the  payment  of  the  amount  advanced  by  the  plaintiff  in 
order  to  put  the  title  in  the  defendant,  and  the  balance  to  the  pay- 
ment of  the  execution  under  which  the  property  is  sold.  Park's 
Ann.  Code,  §  6038. 

The  equity  of  a  person  who  has  given  a  deed  to  secure  debt  is 
not  subject  to  levy  and  sale.  Where  a  loan  is  made  and  a  deed 
to  secure  debt  taken  and  the  party  has  already  given  a  prior 
security  deed,  the  lender  would  have  to  proceed  in  accordance 
with  the  section  above  mentioned.  That  is  to  say,  he  would  first 
have  to  reduce  his  claim  to  judgment  and  then  pay  off  the  debt 
to  the  holder  of  the  first  deed,  and  when  title  was  in  this  way 
put  in  the  debtor,  he  could  levy  on  and  sell  the  property.  It  can 
readily  be  seen  that  this  makes  a  second  security  deed  very  poor 
security  where  the  amount  secured  by  the  first  deed  is  consider- 
able. 


LOANS. 

Power  Conferred  on  Officer  to  Borrow  Money  for  Corporation 
Does  Not  Generally  Extend  Beyond  the  Year. 

Is  a  resolution  passed  by  the  directors  of  a  corporation  in  1919,  author- 
izing the  president  and  manager  to  negotiate  loans  from  time  to  time,  as 
in  his  judgment  may  be  necessary,  sufficient  authority  to  such  officer  to 
secure  loans  on  behalf  of  the  corporation  in  a  subsequent  year? 

The  by-laws  of  most  corporations  provide  that  directors  and 
officers  shall  be  elected  at  each  annual  meeting,  and  this  is  cus- 
tomary even  with  those  small  business  corporations  which  have  no 


368  PARK'S  BANKING  LAW  OF  GEORGIA. 

regular  by-laws.  Officers  are  usually,  elected  to  hold  office  until 
the  next  annual  meeting.  A  specific  authority  conferred  by  reso- 
lution of  the  board  of  directors  would  generally  not  be  presumed 
to  continue  longer  than  the  term  for  which  the  officer  was  elected, 
and  one  board  of  directors  would  not  generally  be  presumed  to 
have  intended  to  provide  for  the  carrying  on  of  the  business  of 
the  corporation  beyond  the  next  annual  meeting  nor  to  confer  au- 
thority on  an  officer  to  be  elected  by  their  successors.  I  think, 
therefore,  that  a  bank  should  require  a  resolution  by  the  board 
for  the  current  year  conferring  authority  on  the  officer.  This 
would  certainly  be  safer. 

A  resolution  passed  by  a  board  in  1919  would  not  be  pre- 
sumed to  have  been  intended  to  bind  the  board  elected  in  1920, 
and  in  order  to  confer  authority  upon  the  officer  a  new  resolution 
should  be  passed  by  the  new  board  of  directors.  For  instance, 
where  a  bank  borrows  money  from  its  correspondents,  a 'specific 
authority  is  ordinarily  required  for  each  transaction,  or  at  least 
a  general  resolution  passed  at  the  beginning  of  each  new  year. 

While  this  is  true,  it  is  also  true  that  "where  all  of  the  share- 
holders of  the  corporation  by  their  direct  act  or  acquiescence  invest 
the  executive  officer  of  the  company  with  the  powers  and  functions 
of  the  board  of  directors,  as  a  continuous  and  permanent  arrange- 
ment, there  being  no  board  of  directors,  or,  if  directors,  they 
being  entirely  inactive,  and  the  officer  discharging  all  its  duties, 
a  mortgage  on  the  personal  property  of  the  corporation,  made 
and  executed  in  its  behalf  by  such  officer  to  secure  one  who  in- 
dorsed a  note  in  order  to  secure  a  loan  for  it  and  who  had  to  pay 
such  loan,  is  valid  as  against  the  corporation."  Garmany  v. 
Lawton,  124  Ga.  876.  If  the  circumstances  are  such  as  those  de- 
tailed in  the  above  quotation,  a  loan  made  by  the  officer  would  be 
binding  on  the  corporation,  but  it  would  be  far  better  to  have  a 
regular  resolution  by  the  board  of  directors  authorizing  the 
officer  to  make  loans  on  behalf  of  the  company. 


Authority  of  Officer  to  Borrow  Money  Should  Be  Shown  by 
Copy  of  Resolution  of  Directors  Properly  Certified. 

How   should  the   authority  of   an   officer  of   a  corporation  to  borrow 
money  be  shown? 

Corporations   can  only   act  through   their  officers  or  agents. 
These  derive  their  authority  either  from  the  by-laws  or  through 


OPINIONS  OF  THE  GENERAL  COUNSEL.  369 

resolutions  of  the  stockholders  or  board  of  directors.  The  board 
of  directors  in  most  corporations  manages  and  controls  all  the 
ordinary  affairs  and  business  of  the  corporation.  Stockholders 
and  directors  can  only  act  when  duly  assembled  in  meeting  held 
in  accordance  with  the  charter  and  by-laws.  Minutes  of  these 
meetings  should  be  kept  and  all  resolutions  adopted  entered 
thereon.  Of  course,  a  corporation  may  be  bound  by  acts  of  its 
officers  which  have  not  been  formally  authorized,  by  acquiescence 
or  ratification. "  But  authority  to  bind  the  corporation  should  be 
shown  by  the  by-laws  or  by  resolution  duly  passed  by  the  di- 
rectors or  stockholders  and  entered  on  the  minutes. 

The  regular  way  in  which  such  corporate  action  is  shown  is 
by  a  certified  copy  of  the  resolution  as  it  appears  on  the  minutes, 
under  the  seal  of  the  corporation,  attested  by  the  secretary.  The 
secretary's  certificate  should  show  that  the  resolution  authorizing 
the  action,  the  loan  in  this  case,  was  duly  passed  at  a  meeting  of 
the  directors  or  stockholders,  as  the  case  may  be,  regularly  called 
in  accordance  with  the  by-laws  of  the  corporation,  and  that  a 
quorum  was  present.  It  should  also  recite  that  the  resolution 
has  been  duly  entered  on  the  minutes  of  the  company. 

It  is  very  important  in  dealing  with  an  officer  of  a  corporation 
that  there  should  be  no  doubt  as  to  his  authority,  especially  when 
he  undertakes  to  execute  papers  which  are  out  of  the  usual,  such, 
for  instance,  as  a  mortgage  on  the  corporation's  property.  Bank 
officers  cannot  be  too  careful  in  requiring  that  an  officer  purport- 
ing to  act  for  a  corporation  shall  furnish  proof  of  his  authority 
in  the  form  of  a  properly  certified  resolution  of  the  board  of  di- 
rectors, or  stockholders,  or  of  a  by-law. 


Loans  to  Live-Stock  Dealers  with  Which  to  Buy  Stock, 
Difficulty  in  Properly  Securing  Shown. 

Can  a  bank  safely  lend  money  to  a  customer  engaged  in  the  live  stock 
business,  that  is,  buying  and  selling  stock;  and  what  kind  of  paper  should 
be  taken  to  secure  advances  for  use  in  such  a  business? 

The  question  does  not  disclose  definitely  the  method  which  the 
customer  pursues  in  the  handling  of  his  business.  Presumably, 
he  is  buying  up  cattle  and  other  stock  and  selling  them  to  packing 
houses  or  other  dealers,  not  keeping  any^  regular  stock  or  supply 
on  hand,  at  times  having  none,  or  practically  none,  and  at  other 
times  a  large  supply.  What  is  desired  is  an  opinion  as  to  how  a 
24 


370  PARK'S  BANKING  LAW  OF  GEORGIA. 

bank  can  advance  such  a  customer  money  to  be  used  in  purchas- 
ing live  stock,  the  advances  to  be  repaid  when  the  stock  is  sold. 

The  question  is  by  no  means  an  easy  one.  Apparently  there 
is  no  satisfactory  method  by  which  these  advances  can  be  made 
and  properly  secured.  The  bank,  of  course,  could  take  a  mort- 
gage on,  or  a  bill  of  sale  to,  the  stock  as  it  is  purchased,  and  have 
these  papers  recorded;  but  when  the  stock  was  sold  and  the 
money  paid  over  in  satisfaction  of  the  mortgage  or  bill  of  sale, 
additional  mortgages  or  bills  of  sale  would  have  to  be  taken  cov- 
ering each  new  lot  purchased.  This,  of  course,  is  not  satisfac- 
tory. 

The  Code  provides  that  a  mortgage  may  be  given  covering  a 
stock  of  merchandise  or  other  articles  changing  in  specific.  But 
on  account  of  the  way  business  of  this  character  is  usually  carried 
on,  the  dealer  would  not  have  on  hand  any  regular  stock  which 
could  be  covered  by  such  a  mortgage,  though  there  would  be 
changes  in  its  composition.  Consequently,  if  the  bank  took  a  stock 
mortgage  without  attempting  actually  to  describe  the  live  stock 
covered,  as  is  usually  necessary,  when  the  stock  on  hand  at  the 
time  the  mortgage  was  given  was  all  sold  there  would  be  nothing 
on  which  the  mortgage  could  operate. 

It  is  thus  almost  impossible  to  taRe  a  mortgage  or  other  lien  on 
property  which  is  constantly  shifting  and  changing  as  this  is, 
which  has  no  fixed  locality,  and  which  cannot  be  described  with 
anything  like  sufficient  accuracy  to  identify  it.  For  example, 
there  may  be  ten  head  of  cattle  to-day,  fifty  to-morrow,  and  none 
the  next  day ;  and  there  may  be  cattle  located  in  one  place  to-day, 
at  an  entirely  different  place  to-morrow,  and  some  at  one  place 
and  some  at  another  on  the  same  day. 

In  some  cases,  where  business  of  somewhat  similar  character 
was  carried  on,  banks  have  entered  into  contracts  with  customers, 
under  which  they  agreed  to  hold  in  trust  for  the  bank  the  money 
advanced  and  all  of  the  articles  purchased  therewith,  and  to  ac- 
count to  the  bank  for  the  proceeds  of  all  articles  sold  and  to 
deliver  at  any  time  upon  demand  either  the  money  advanced,  the 
articles  purchased,  or  the  proceeds  of  any  which  might  have 
been  sold.  In  such  cases  the  customer  is  constituted  a  special 
agent  of  the  bank  to  use  and  expend  the  money  advanced.  Under 
a  carefully  drawn  contract  of  this  character,  the  customer  would 
be  bound  to  account  to  the  bank,  and  if  he  failed  to  do  so  would  be 
liable  criminally  for  larceny  after  trust.  This,  however,  is  very 
poor  security.  The  agent  of  the  bank  created  in  this  way  would 


OPINIONS  of  THE  GENERAL  COUNSEL.  371 

have  the  right  to  sell  and  the  bank  would  have  no  lien  on  the 
property.  If  such  an  agent  should  fail  to  account  for  the  pro- 
ceeds of  the  sales,  or  should  run  off,  or  should  dispose  of  the 
property,  the  bank  would  be  practically  without  protection  other 
than  criminal  prosecution. 

If  such  customer  owns  any  property,  he  should  be  given  a  line 
of  credit  sufficient  for  his  requirements  and  secured  by  a  mort- 
gage on  such  property.  A  mortgage  of  this  kind  could  be  pre- 
pared so  as  to  secure  the  amount  advanced  at  the  time  the  mort- 
gage was  executed  and  additional  amounts  that  might  be  ad- 
vanced from  time  to  time,  not  exceeding  a  given  sum.  This 
would  leave  the  customer  entirely  free  to  carry  on  his  business 
in  his  own  way,  without  any  liens  on  the  stock  purchased  and 
without  any  liability  to  account  for  the  proceeds  of  sale.  And  at 
the  same  time  the  bank  would  be  secured  by  stable  property  and 
would  be  protected  in  handling  the  account. 


LOANS  TO  PUBLIC  CORPORATIONS. 


County  Boards  of  Education  May  Borrow  Money  to  Pay 
Teachers'  Salaries. 

Can  a  bank  safely  lend  to  county  boards  of  education  under  the  Act 
of  1910  (Park's  Ann.  Code,  §§  1548  a-g),  authorizing  them  to  borrow 
money  to  pay  the  salaries  of  teachers?  Explain  the  operation  of  this  law. 

Where  the  terms  of  the  act  are  complied  with,  the  loans  made 
under  it  are  valid  and  binding,  and  I  see  no  reason  why  a  bank 
cannot  safely  make  such  loans.  The  act,  however,  should  be  care- 
fully looked  to,  and  it  should  be  seen  that  all  of  its  provisions  and 
requirements  are  literally  followed ;  otherwise,  in  case  of  contest, 
there  might  be  considerable  difficulty  in  enforcing  the  debt. 

By  the  terms  of  the  act,  the  county  boards  of  education  of 
the  several  counties  are  authorized  to  borrow  a  sufficient  amount, 
and  no  more,  to  pay  the  salaries  of  the  teachers  in  the  public 
schools,  the  salaries  to  be  paid  being  restricted  to  those  of  the  cur- 
rent school  year  in  which  the  money  is  borrowed,  and  the  board 
being  limited  in  the  amount  to  be  borrowed  to  the  sum  to  which 
the  county  may  be  entitled  from  the  public  school  fund.  The  act 
provides  that  the  board  of  education  shall  pass  a  resolution,  in 
which  shall  be  stated  the  amount  of  money  to  be  borrowed,  the 
length  of  time  same  is  to  be  used,  the  rate  of  interest,  the  pur- 


372  PARK'S  BANKING  LAW  OF  GEORGIA. 

pose  for  which  the  money  is  borrowed,  and  from  whom,  and  that 
this  resolution  shall  be  entered  on  the  minutes  of  the  board.  The 
bank  should  require  a  certified  copy  of  this  resolution,  the  cer- 
tificate showing  that  it  was  adopted  at  a  regular  meeting  of  the 
board  at  which  a  quorum  was  present,  and  that  the  resolution 
had  been  entered  upon  the  minutes  of  the  board  by  the  county 
school  superintendent.  This  resolution  should  also  show  that  the 
amount  to  be  borrowed  is  not  in  excess  of  the  amount  which  the 
county  will  receive  from  the  public  school  fund.  In  other  words, 
the  resolution  should  be  full  and  complete,  and  should  follow  the 
terms  of  the  act  in  every  respect. 

The  act  further  provides  that  the  note  shall  be  signed  in  the 
name  of  the  board  of  education  of  the  county  by  the  president 
of  the  board  of  education  and  the  county  school  superintendent. 
It  would  perhaps  be  well  to  add  to  the  note  a  statement  that  it  is 
given  pursuant  to  a  resolution  passed  by  the  board  of  education, 
giving  the  date  upon  which  the  resolution  was  adopted.  The 
money  advanced  upon  such  loan  should  be  paid  over  to  the  county 
school  superintendent,  and  disbursed  by  him,  and  the  superin- 
tendent is  authorized  to  repay  the  loan  out  of  any  funds  coming 
into  his  hands  which  are  legally  applicable  to  the  payment. 

It  would  be  well  to  have  the  note  mature  at  the  time  when  the 
superintendent  will  be  in  funds,  as  the  act  expressly  provides  that 
no  money  shall  be  borrowed  for  any  longer  time  than  is  necessary, 
and  shall  be  paid  back  out  of  the  funds  coming  into  the  hands  of 
the  superintendent. 

What  has  been  said  is  little  more  than  a  summary  of  the  pro- 
visions of  the  act.  It  would  be  well  for  the  officials  of  the  bank 
to  get  the  act  itself,  study  it  carefully,  and  see  that  the  resolution 
and  note  itself  are  in  accordance  with  the  act,  and  that  the  money 
is  borrowed,  and  will  be  used,  solely  for  the  purpose  of  paying  the 
salaries  of  the  teachers  for  the  current  school  year. 

NOTE. — The  sections  of  Park's  Ann.  Code  above  referred  to  have  been 
reenacted  in  what  is  known  as  the  Georgia  School  Code,  §§  102-108,  in 
exactly  the  same  language,  with  the  exception  that  instead  of  being  limited 
to  a  sufficient  amount  of  money  to  pay  the  salaries  of  teachers,  the  au- 
thority of  the  county  boards  of  education  is  extended  to  borrowing  a  suf- 
ficient amount  of  money  to  pay  for  the  operation  of  the  public  schools  of 
their  counties,  and  the  proviso  limiting  this  authority  to  salaries  for  the 
current  school  year  is  stricken.  Acts  1919,  pp.  328-330. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  373 

Trustees  of  Local  School  Districts  Have  No  Authority  to 
Borrow  Money. 

Can  the  trustees  of  a  local  school  district,  which  is  merely  a  subdivision 
of  the  county  created  under  what  is  known  as  the  "McMichael  Act"  bor- 
row money  and  give  notes  or  other  obligations  therefor? 

I  do  not  know  of  any  authority  for  the  trustees  of  such  a  dis- 
trict to  borrow  money  and  make  a  note  or  other  obligation  there- 
for. Any  loans  made  to  the  trustees  of  the  district  would  have  to 
be  made  simply  as  a  good  faith  proposition,  the  trustees  having 
no  legal  right  to  borrow  the  money  or  execute  a  binding  obliga- 
tion therefor.  Provision  is  made  for  the  county  board  of  educa- 
tion to  borrow  money  in  order  to  pay  teachers'  salaries,  but  there 
seems  to  be  no  provision  for  the  trustees  of  the  separate  districts 
to  make  such  loans. 


Municipal  Corporations  Have  No  Right  to  Borrow  Money 
Except  for  Casual  Deficiencies  in  Revenue. 

Is  a  note  given  by  the  mayor  and  aldermen  of  a  municipality  under  au- 
thority of  a  resolution  regularly  passed  at  a  meeting  of  the  board  legal? 

The  Constitution  of  Georgia,  Article  7,  Section  7,  Paragraph  1, 
provides  that: 

"The  debt  hereafter  incurred  by  any  county,  municipal  corpora- 
tion or  political  division  of  this  State  shall  not  exceed  seven  per 
centum  of  the  assessed  value  of  all  the  taxable  property  therein, 
and  no  such  county,  municipality,  or  division  shall  incur  any  new 
debt,  except  for  a  temporary  loan  or  loans  to  supply  casual  de- 
ficiencies of  revenue,  not  to  exceed  one-fifth  of  one  per  centum 
of  the  assessed  value  of  taxable  property  therein,  without  the 
assent  of  two-thirds  of  the  qualified  voters  thereof  at  an  election 
for  that  purpose  to  be  held  as  may  be  prescribed  by  law."  Park's 
Ann.  Code,  §  6563. 

In  discussing  this  section,  Mr.  Justice  Cobb  in  the  Dawson 
Water  Works  case,  106  Ga.  696,  713,  says : 

"It  was  the  purpose  of  the  constitutional  provision  to  provide  a 
system  of  finance  for  subordinate  public  corporations  under 
which  there  should  be  each  year  contracts  made  for  the  expenses 
of  the  year,  and  these  were  to  be  paid  out  of  moneys  arising  from 
taxes  levied  during  the  year,  that  is,  each  year's  expense  should  be 
paid  by  taxes  levied  during  the  year,  and  no  item  of  expense  was 
to  be  paid  except  out  of  the  taxes  levied  during  the  year  in  which 
the  contract  for  the  expense  was  made." 

In  the  case  of  the  Town  of  Wadley  v.  Lancaster,  124  Ga.  354, 
the  Supreme  Court  held  that  a  municipal  corporation  could  not 


374  PARK'S  BANKING  LAW  OF  GEORGIA. 

lawfully  purchase  a  fire  engine  and  give  negotiable  promissory 
notes  therefore,  payable  annually  through  a  series  of  years,  and 
that  a  promissory  note  given  under  such  contract  is  invalid  even 
in  the  hands  of  a  bona  fide  purchaser  for  value  before  maturity. 
In  the  case  of  Tate  v.  City  of  Elberton,  136  Ga.  301,  the  Su- 
preme Court  says: 

"A  liability  for  a  legitimate  current  expense  may  be  incurred, 
provided  there  is  at  the  time  of  incurring  the  liability  a  sufficient 
sum  in  the  treasury  of  the  municipality  which  may  be  lawfully 
used  to  pay  the  liability  incurred,  or  if  a  sufficient  sum  to  dis- 
charge the  liability  can  be  raised  by  taxation  during  the  current 
year.  This  does  not  authorize  municipal  authorities  to  borrow 
money  (not  to  supply  casual  deficiencies  of  revenue)  for  the 
purpose  of  using  it  during  the  year  in  defraying  current  expenses 
as  occasion  may  arise,  and  to  give  notes  therefor." 

The  giving  of  promissory  notes  by  a  municipal  corporation  is 
entirely  without  the  scheme  of  municipal  finance  provided  by  the 
Constitution.  Where  an  unexpected  deficiency  in  revenue  arises, 
money  may  be  borrowed  to  meet  such  deficiency  within  the  con- 
stitutional limit,  and  a  note  given  under  these  circumstances 
would  be  valid. 


Loans  to  Public  Service  Corporations  Where  for  More  Than 
Twelve  Months  Must  Be  Approved  by  Railroad  Commis- 
sion. 

Has  a  local  telephone  company,  incorporated,  the  right  to  borrow 
money  without  getting  permission  from  the  Railroad  Commission? 

Under  the  amendment  of  the  Railroad  Commission  law  in- 
creasing the  powers  of  the  Commission,  jurisdiction  over  tele- 
phone and  telegraph  companies  within  this  State  is  conferred 
upon  the  Commission.  This  seems  to  be  true  whether  the  com- 
pany is  strictly  a  local  company  or  also  controls  long  distance 
lines,  the  language  of  the  law  being,  "over  all  common  carriers 
*  *  *  telephone  and  telegraph  corporations  or  companies 
within  this  State."  It  is  further  provided  by  the  Railroad  Com- 
mission Act  that  all  companies  or  corporations  over  which  the 
authority  of  the  Railroad  Commission  is  extended  shall  be  re- 
quired to  furnish  a  list  of  any  stocks  or  bonds  the  issuance  of 
which  is  contemplated,  and  that  it  shall  be  unlawful  for  any  of 
such  corporations  or  companies  to  issue  stocks,  bonds,  notes,  or 
other  evidences  of  debt  payable  more  than  twelve  months  after 
date  thereof,  except  upon  the  approval  of  the  Railroad  Commis- 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  375 

sion,  and  then  only  when  necessary  and  for  such  amount  as  may 
be  required  for  the  proper  purposes  of  the  corporation.  Under 
this  section  it  would  be  necessary  before  a  telephone  company 
undertook  to  give  its  notes  payable  more  than  twelve  months 
from  the  date  thereof  for  the  purpose  of  borrowing  money  that 
the  approval  of  the  Railroad  Commission  be  obtained.  This 
would  not  apply,  of  course,  to  temporary  loans  to  be  repaid  within 
the  year. 


LOSS  IN  MAILS. 


Loss  of  Package  in  Mails  Falls  on  Addressee. 

A  bank  orders  stamps  from  collector  of  internal  revenue,  and  remits 
therefor.  The  shipment  is  never  received,  but  is  supposed  to  have  been 
lost  in  the  mails.  Does  loss  fall  on  the  government  or  on  the  bank? 

As  soon  as  the  stamps  are  mailed,  the  responsibility  of  the  col- 
lector ceases.  The  rule  is  that  the  delivery  of  a  shipment  to  a 
carrier  is  delivery  to  the  consignee.  The  same  rule  holds  with 
regard  to  delivery  to  the  mails.  When  a  letter  is  posted  the  for- 
warder has  no  further  control  over  it,  and  whether  the  addressee 
receives  the  letter  or  not,  the  transaction  is  completed.  Assuming, 
of  course,  that  the  collector  mailed  the  stamps,  the  loss  in  the 
mails  would  be  the  bank's  loss  and  not  the  Government's  loss. 


LOST  INSTRUMENTS. 


How  Bank  May  Be  Protected  in  Paying  or  Issuing  Duplicates. 

What  steps  can  be  taken  to  protect  a  bank  in  issuing  a  duplicate  cashier's 
check,  where  the  purchaser  of  the  original  claims  to  have  lost  the  check, 
and  his  financial  responsibility  is  not  sufficient  to  warrant  issuing  a  dupli- 
cate on  his  obligation  to  protect  the  bank  against  the  lost  original? 

Two  courses  are  open.  One  is  to  require  the  purchaser  to  es- 
tablish the  paper  as  a  lost  instrument  under  the  provisions  of  the 
Code.  Where  this  is  done,  he  would  have  to  show  to  the  satis- 
faction of  the  court  that  the  paper  was,  in  fact,  lost,  and  that  it 
had  not  been  transferred,  and  was  not  in  the  hands  of  an  inno- 
cent holder.  The  court  would  require  a  bond  to  protect  the  bank 
from  loss,  in  the  event  the  original  should  be  found. 

The  other  course  would  be  to  require  the  holder  of  the  original 


376  PARK'S  BANKING  LAW  of  GEORGIA. 

check  to  furnish  an  indemnity  bond,  with  satisfactory  surety,  to 
protect  the  bank  against  loss  in  the  event  the  original  should  be 
found.  In  addition  to  the  bond,  an  affidavit  should  also  be  re- 
quired from  the  purchaser  of  the  check,  to  the  effect  that  the 
original  has  been  lost ;  that  it  had  not  been  indorsed,  that  he  has 
made  diligent  search  for  it  and  is  unable  to  locate  it.  This  affi- 
davit would  be  a  protection  against  fraud  on  his  part,  and  a  bond 
would  protect  the  bank  against  a  holder  who  might  have  pur- 
chased the  check  from  the  finder  thereof. 

It  is  best  to  proceed  according  to  the  first  method,  which  is  the 
regular  course  provided  by  law,  and  affords  generally  better 
protection  than  any  other. 

Where  the  check  is  not  very  large,  I  think  the  bank  would  be 
very  well  protected  by  adopting  the  latter  course,  there  being 
some  expense  attached  to  the  first  method. 


Method  of  Establishing  Lost  Stock  Certificate. 

What  is  necessary  for  the  protection  of  a  bank  in  issuing  a  duplicate 
stock  certificate? 

The  legislature  in  1910  (Park's  Ann.  Code,  §§  5321  a-d)  made 
full  provision  for  the  establishment  of  lost  stock  certificates  and 
for  the  protection  of  the  bank  where  a  certificate  is  so  estab- 
lished. The  act  provides  that  a  petition  shall  be  filed  in  the  Su- 
perior Court  of  the  county  in  which  the  bank  is  located,  which 
petition  shall  contain  a  description  of  the  lost  certificate,  state 
how  its  loss  occurred,  and  pray  for  the  establishment  of  a  copy. 
The  judge  issues  a  citation,  which  is  published  once  a  week  for 
four  weeks  and  served  upon  the  bank,  calling  on  all  persons  who 
may  be  interested  to  show  cause  why  the  lost  certificate  should 
not  be  established.  If  no  defense  is  made  at  the  time  fixed  for 
the  hearing,  or  if  the  defense  is  not  sustained,  a  copy  is  estab- 
lished in  lieu  of  the  lost  original.  The  act  provides  that  when 
such  copy  is  established  all  liability  of  the  bank  to  any  holder  of 
the  original  certificate  shall  cease,  and  that  the  established  copy 
shall  take  the  place  in  all  respects  of  the  lost  original. 

I  do  not  think  it  would  be  safe  for  a  bank  to  proceed  in  any 
other  manner  than  in  strict  compliance  with  the  terms  of  this 
statute. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  377 

MARRIED  WOMAN. 


Cannot  Be  Surety  or  Pledge  Her  Property  for  Debt  of 
Another. 

Do  the  restrictions  on  the  right  of  a  married  woman  to  become  surety 
for  another  apply  to  personal  property  as  well  as  to  real  estate?  Can  a 
married  woman  ever  be  held  liable  upon  a  contract  of  suretyship? 

The  restrictions  on  the  right  of  a  married  woman  to  contract 
applies  to  personal  property  as  well  as  to  real  property.  Where 
she  lends  her  credit  to  her  husband  or  to  anyone  else,  or  pledges 
her  property  as  security  for  the  debt  of  another,  she  is  not  liable 
on  the  contract  and  may  recover  her  property. 

A  married  woman  may,  however,  borrow  money  on  her  own 
credit  and  pledge  her  property  to  secure  the  debt,  and  give  the 
proceeds  to  her  husband  or  pay  her  husband's  debt  with  the 
money,  provided  the  loan  is  not  made  from  the  creditor  of  the 
husband.  She  can  also  give  her  husband  her  property,  either 
real  or  personal,  though  she  can  not  sell  it  to  him  without  the 
approval  of  the  judge  of  the  superior  court.  Park's  Ann.  Code, 
§  3009. 

While  a  married  woman  has  the  right  to  recover  her  property 
which  has  been  pledged  as  security  for  the  debt  of  another  or  to 
repudiate  her  contract  of  suretyship,  she  may  under  some  cir- 
cumstances be  estopped  to  do  so  just  as  anyone  else  may  be.  In 
what  is  possibly  the  leading  case  in  Georgia,  a  married  woman 
stated  to  a  creditor  who  had  sold  goods  to  a  business  with  which 
she  was  connected  that  the  business  belonged  to  her  and  not  to 
her  husband.  On  the  faith  of  this  statement,  the  creditor  made 
no  effort  to  collect  his  debt,  knowing  that  she  was  good.  When 
sued  on  the  account  she  pleaded  that  it  was  the  debt  of  her  hus- 
band. The  Supreme  Court  held,  however,  that,  the  wife  having 
led  the  creditor  to  believe  that  the  business  was  hers,  and  the 
creditor  having  taken  no  steps  to  collect  the  account  of  her 
husband,  she  could  not  plead  that  it  was  her  husband's  debt. 
Wolff  v.  Hawes,  105  Ga.  153. 

There  may  be  other  cases  where  a  married  woman  would  be 
estopped  to  reclaim  her  property  which  she  had  loaned  to  her 
husband  or  another  person  and  upon  the  security  of  which  a  loan 
had  been  made,  as  where  she  had  stated  to  the  creditor  that  the 
property  belonged  to  her  husband  and  she  had  no  interest  in  it; 
but  where  the  lender  knows  that  the  property  pledged  by  the  hus- 


378  PARK'S  BANKING  LAW  OF  GEORGIA. 

band  is  the  property  of  the  wife,  the  wife  would  not  be  estopped 
from  recovering  the  property.  Nor  would  the  act  of  the  husband 
in  pledging  her  property,  although  with  her  knowledge  and  con- 
sent, estop  her,  unless  she  by  her  own  affirmative  act  misled  the 
creditor. 


Loan  to  Married  Woman,  Secured  by  Her  Individual  Prop- 
erty, Valid  Though  Lender  May  Know  Money  Is  to  Be 
Used  in  Paying  Husband's  Debt  to  Another. 

Can  a  bank  safely  lend  to  a  married  woman,  secured  by  a  mortgage  or 
security  deed  on  her  individual  property,  where  the  bank  knows  that  her 
purpose  in  making  the  loan  is  to  obtain  money  with  which  to  pay  her  hus- 
band's debts? 

It  is  well  settled  under  the  decisions  of  the  Supreme  Court  that 
such  a  loan  is  valid  and  is  binding  upon  a  married  woman.  I 
quote  from  the  case  of  Chastain  v.  Peak,  111  Ga.  889 : 

"If  a  married  woman  voluntarily  and  upon  her  own  responsi- 
bility borrowed  money  and  gave  therefor  a  note  and  mortgage, 
she  was  bound  by  her  contract,  although  her  object  in  obtaining 
the  loan  was  to  raise  money  for  the  purpose  of  paying  a  debt 
due  by  her  husband,  and  although  this  fact  was  known  to  the 
lender,  if  the  latter  was  not  the  creditor  to  be  thus  paid,  and  had 
nothing  to  do  with  any  arrangement  or  scheme  between  the  hus- 
band and  wife,  looking  to  the  accomplishment  of  the  results  in- 
tended." 

To  the  same  effect  are  Nelms  v.  Keller,  103  Ga.  745 ;  Johnson 
v.  Leffler  Company,  122  Ga.  670,  and  Maynard  &  Company  v. 
Maynard,  12  Ga.  App.  279.  Possibly  the  strongest  case  is  that  of 
Longley  v.  Bank,  19  Ga.  App.  701,  from  which  I  also  quote: 

"Where  a  note  is  signed  by  a  wife  as  principal  and  by  the  hus- 
band as  surety,  the  presumption  of  law  is  that  she  gives  it  on  her 
own  contract  and  for  value,  to  charge  her  separate  property. 
Perkins  v.  Rowland,  69  Ga.  661 ;  Love  v.  Lamar,  78  Ga.  323  (3 
S.  E.  90) ;  Temples  v.  Equitable  Mortgage  Co.,  100  Ga.  503  (28 
S.  E.  232,  62  Am.  St.  R.  326) ;  Jones  v.  Weichselbaum,  115  Ga. 
369  (41  S.  E.  615). 

"Where  the  creditor,  at  the  time  a  debt  is  created,  really  intends 
in  good  faith  to  extend  the  credit  to  the  wife,  and  not  to  the  hus- 
band, and  the  consideration  of  the  loan  passes  legally  and  morally 
from  the  creditor  to  the  wife,  and  where  the  writings  then  exe- 
cuted are  such  as  purport  to  bind  her  for  the  debt  as  her  own, 
then,  whatever  may  be  the  private  understanding  between  the 
wife  and  the  husband,  in  which  the  creditor  is  not  concerned  and 
in  which  he  has  no  interest,  as  to  the  disposition  by  the  wife  of 
the  proceeds  of  the  loan  so  received  by  her,  the  writings  are  to  be 


OPINIONS  OF  THE  GENERAL  COUNSEL.  379 

treated  as  embracing  the  true  substance  of  the  contract.  Nor  does 
it  matter  in  such  case  that  the  negotiations  relating  to  the  loan 
are  in  fact  all  had  through  the  husband,  where  the  transaction 
otherwise  appears  to  be  the  bona  fide  and  voluntary  contract  of 
the  wife.  Schofield  v.  Jones,  85  Ga.  816,  819  (11  S.  E.  1032)  ; 
Nelms  v.  Keller,  103  Ga.  745  (30  S.  E.  572)  ;  Johnson  v.  Leffler 
Co.,  112  Ga.  670  (50  S.  E.  488)  ;  Gross  v.  Whitely,  128  Ga.  79, 
82  (57  S.  E.  94)  ;  Third  National  Bank  of  Columbus  v.  Poe,  5 
Ga.  App.  113  (62  S.  E.  826) ." 

It  is  held,  however,  in  Gross  v.  Whitely,  128  Ga.  79 : 

"Tho'ugh  a  wife  may  contract  as  a  feme  sole,  she  can  not  bind 
her  separate  estate  by  any  contract  of  suretyship,  nor  by  any 
assumption  of  the  debts  of  her  husband,  nor  sell  her  property  in 
extinguishment  of  his  indebtedness.  Her  inability  to  bind  her 
separate  estate  by  a  contract  of  suretyship  precludes  her  from  de- 
livering her  property  in  pledge  for  her  husband's  debt.  A  deed 
executed  by  a  married  woman  to  a  third  person  to  secure  a  loan 
contemporaneously  made  to  the  husband  is  void,  although  the 
wife  did  not  bind  herself  as  surety  to  pay  the  husband's  debt 
which  the  deed  was  given  to  secure." 

In  Nelms  v.  Keller,  103  Ga.  746,  the  court  say : 

"The  whole  law  of  this  question  is  comprised  in  the  following 
language  used  by  the  present  Chief  Justice  in  McCrary  v.  Grandy, 
92  Ga.  327:  'Under  our  code  (§  2488)  there  are  three  things 
which  a  married  woman  having  a  separate  estate  can  not  lawfully 
do.  She  can  not  bind  her  separate  estate  by  any  contract  of 
suretyship,  nor  can  she  assume  the  debts  of  her  husband,  nor  sell 
her  separate  estate  to  a  creditor  to  extinguish  his  debts.  If  she 
should  do  any  of  these  things,  the  transaction  would  be  absolutely 
void.  These  are  the  only  restrictions  put  upon  her  in  dealing  with 
her  separate  estate,  and  outside  of  them,  she  stands  upon  the 
same  footing  as  a  man  or  a  feme  sole.' " 


Joint  Mortgage  of  Husband  and  Wife  Valid  Though  Money 
Borrowed  to  Pay  Husband's  Debts. 

What  would  be  the  status  of  the  bank  in  the  event  property  offered  as 
security  for  a  loan  is  owned  in  part  by  a  husband  and  in  part  by  his  wife, 
who  both  sign  the  note  and  loan  deed,  it  appearing  that  the  larger  part  of 
the  money  is  to  be  used  in  paying  off  an  incumbrance  on  the  part  of  the 
land  belonging  to  the  husband,  or  otherwise  used  for  the  payment  of  the 
husband's  debts? 

It  will  be  seen  from  the  preceding  opinion  that 

"A  married  woman  may  voluntarily  and  upon  her  own  respon- 
sibility borrow  money  and  secure  the  same  by  mortgage,  although 
her  object  in  obtaining  the  loan  is  to  raise  money  to  pay  a  debt 


380  PARK'S  BANKING  LAW  OF  GEORGIA. 

of  her  husband,  and  although  this  fact  is  known  to  the  lender,  if 
the  latter  is  not  the  creditor  to  be  thus  paid,  and  the  contract  is 
valid  and  binding  upon  her." 

If  the  wife  may  borrow  for  the  sole  purpose  of  paying  her 
husband's  debt,  I  do  not  think  the  fact  that  her  husband  signs 
the  note  and  mortgage  and  that  the  mortgage  includes  also  prop- 
erty belonging  to  the  husband,  would  affect  the  question.  The 
situation  would  be  altogether  different,  of  course,  if  the  mort- 
gage was  made  to  an  existing  creditor  of  the  husband. 

It  is  true  that  it  has  been  held  that  where  a  mortgage  is  given 
for  future  advances  to  be  made  to  husband  and  wife  jointly,  the 
wife  is  bound  only  to  the  extent  of  the  consideration  afterwards 
received  by  her.  Dobbins  v.  Blanchard,  94  Ga.  500.  And  it  has 
been  held  also  that  a  sale  of  the  wife's  property  in  part  for  a  con- 
sideration paid  to  her  and  in  part  in  payment  of  the  husband's 
debt,  can  not  be  upheld.  Campbell  v.  Trunnell,  67  Ga.  518. 

So,  where  a  married  woman  signs  a  note,  the  consideration  of 
which  is  partly  her  debt  and  partly  the  debt  of  her  husband,  the 
payee  can  only  recover  that  part  which  is  based  on  her  own  debt. 
Jones  v.  Harrold,  110  Ga.  373. 

But  these  and  similar  cases  are  based  upon  the  fact  that  the 
lender  is  the  creditor  of  the  husband.  Where  the  bank  lends  upon 
the  credit  of  the  wife,  having  no  claims  against  the  husband  at 
the  time,  it  is  no  concern  of  the  bank  whether  the  wife  gives  the 
money  to  her  husband  or  uses  it  to  pay  the  husband's  debt.  I 
do  not  think  the  rule  would  be  changed  because  the  husband  also 
signed  the  note  and  included  his  property  with  hers  in  the  security 
deed,  though  there  is  some  room  for  the  argument  that  the  hus- 
band and  the  wife  are  each  principals  to  the  extent  of  the  loan 
to  each,  respectively,  and  sureties  for  each  other  to  the  extent  of 
the  loan  to  the  other,  respectively. 


Bona  Fide  Holder  of  Note  Given  by  Married  Woman  as 
Collateral  Is  Protected. 

A  married  woman  lends  to  her  brother  a  note  to  be  used  as  collateral  to 
a  loan  to  the  brother.  The  lender,  who  knows  the  woman  is  married, 
deposits  the  note  with  a  bank  as  collateral.  Is  the  bank  an  innocent  holder, 
so  that  it  can  sell  the  collateral? 

The  bank  is  an  innocent  holder,  and  can  sell  the  collateral. 
While  a  married  woman  can  not  bind  her  separate  estate  by  any 


OPINIONS  OF  THE  GENERAL  COUNSEL.  381 

contract  of  suretyship,  it  is  yet  true  that  a  bona  fide  purchaser 
of  a  note  given  by  a  married  woman  will  be  protected. 

The  question  does  not  disclose  whether  the  note  was  that  of  a 
third  person  held  by  the  woman  or  whether  it  was  a  note  which 
she,  herself,  executed.  If  it  is  meant  that  she  merely  loaned  to 
her  brother  a  note  of  a  third  person  which  she  held,  to  be  used  by 
the  brother  as  collateral  security,  I  do  not  think  there  could  be 
any  question  that  the  right  of  the  bank  is  superior  to  her  right  to 
the  note. 

But  even  if  it  is  meant  that  she  executed  a  note  to  her  brother 
which  she  knew  he  was  going  to  use  as  collateral  security  for 
money  which  he  intended  to  borrow,  the  holder  of  the  note  under 
the  circumstances  detailed  in  the  question  would  be  protected. 

The  Court  of  Appeals  has  said : 

"While  a  wife  cannot  legally  make  a  contract  of  suretyship  or 
assume  the  debt  of  her  husband,  yet  where  she  has  given  a  ne- 
gotiable note  payable  to  her  husband's  order  and  intended  to  be 
used  as  security  for  or  in  payment  of  his  debt,  and  it  has  been 
transferred  to  a  bona  fide  purchaser  for  value  before  maturity 
and  without  notice,  it  is  valid  and  binds  her."  Farmers  &  Traders 
Bank  v.  Eubanks,  2  Ga.  App.  839. 

The  court  also  says  in  this  case : 

"Where  a  married  woman  gives  her  individual  negotiable  note, 
the  presumption  of  law  is  that  she  gave  it  on  her  own  contract  and 
for  value,  and  when  sued  thereon  the  burden  is  on  her  to  show 
that  the  note  falls  within  some  of  the  restrictions  on  her  right 
to  contract  and  that  the  holder  of  the  note  had  notice  of  its  in- 
validity when  he  took  it." 

So  that  in  either  event,  that  is,  whether  the  married  woman 
simply  transferred  a  note  which  she  owned  to  her  brother,  or 
whether  she  executed  a  note  to  him  to  be  used  as  collateral  for 
his  debt,  the  bank  would  be  an  innocent  holder. 


MINORS. 


Father  Is  Liable  for  Assessment  on  Stock  Bought  by  Him  in 
Name  of  His  Minor  Child. 

Is  a   father  liable   for  assessments  on  stock  in  a  bank  which  he  has 
bought  in  the  name  of  his  minor  child? 

The  rule  is  thus  stated  in  Michie  on  Banks  and  Banking,  p. 
1833: 


382  PARK'S  BANKING  LAW  OF  GEORGIA. 

"One  buying  stock  in  a  national  bank  in  the  names  of  his  minor 
children  himself  becomes  liable  to  assessment  as  a  shareholder, 
for  minors  are  incapable  of  assenting  to  become  stockholders,  so 
as  to  bind  themselves  to  the  liabilities  thereof." 

The  case  of  Foster  v.  Chase,  decided  by  the  United  States  Cir- 
cuit Court  of  Vermont,  and  reported  in  75  Fed.  797,  is  cited  by 
Michie  in  support  of  this  statement,  and  this  appears  to  be  the  only 
case  upon  the  subject.  This  would  seem  to  be  the  correct  rule  in 
view  of  the  principle  of  law  that  minors  are  incapable  of  con- 
tracting. 

The  same  court  holds,  as  is  stated  in  Michie  in  a  footnote  on 
page  1833,  that  "the  father's  liability  on  stock  bought  in  the  name 
of  his  minor  child  is  not  affected  by  the  fact  that  after  the  assess- 
ment, but  before  the  suit  was  brought  to  recover  it,  the  son  be- 
came of  age,  and  assented  to  holding  the  stock." 


MORTGAGES. 


Not  Affected  by  Renewal  of  Original  Note. 

Where  a  mortgage  or  security  deed  specifies  a  certain  note  due  at  a  cer- 
tain time  for  a  certain  amount,  but  makes  no  provision  for  a  renewal,  can 
a  new  note  be  taken  in  renewal  of  the  debt  without  affecting  the  security, 
the  new  note  showing  on  its  face  that  it  is  given  as  a  renewal? 

One  of  the  requisites  of  a  mortgage  is  that  it  must  specify  the 
debt  to  secure  which  it  is  given.  While  this  is  true,  parol  evi- 
dence may  be  admitted  to  identify  a  particular  debt  as  being  the 
same  debt  as  that  described  in  the  mortgage.  It  is  identity  of 
the  debt  rather  than  identity  of  the  note  evidencing  the  debt  which 
is  material.  So  long  as  the  debt  is  the  same,  it  can  always  be 
shown  to  be  the  debt  which  is  secured  by  the  mortgage.  Of 
course,  there  is  some  advantage  in  having  the  note  specified  defi- 
nitely in  the  mortgage,  as  this  relieves  all  question  as  to  the  in- 
debtedness intended  to  be  secured;  but  the  mortgage  is  valid, 
although  the  paper  evidencing  the  debt  may  be  changed. 


OPINIONS  of  THE  GENERAL  COUNSEL.  383 

A  Mortgage  Can  Not  Cover  Subsequently  Created  Debt. 

A  mortgage  is  given  to  secure  two  described  notes  with  no  provision 
for  future  advances  or  other  indebtedness.  Subsequently  another  note  is 
given  by  the  mortgagor  to  the  mortgagee  for  a  new  and  separate  indebt- 
edness, with  a  recital  therein  that  it  is  secured  by  the  mortgage.  Does  the 
mortgage  cover  this  note  as  against  third  parties? 

In  Georgia  a  mortgage  does  not  pass  the  title  to  the  mortgaged 
property,  but  only  creates  a  lien  thereon.  No  particular  form  is 
necessary  to  constitute  a  mortgage.  "It  shall  clearly  indicate  the 
creation  of  a  lien,  specify  the  debt  to  secure  which  it  is  given  and 
property  upon  which  it  is  to  take  effect."  Park's  Ann.  Code, 
§  3257. 

Our  Supreme  Court  has  been  quite  liberal  in  allowing  parol 
evidence  to  explain  or  identify  the  debt  intended  to  be  secured, 
as,  for  instance,  where  a  note  has  been  renewed,  it  can  be  shown 
by  parol  testimony  that  the  renewal  note  represents  the  same  in- 
debtedness as  that  described  in  the  mortgage.  So,  where  a  note 
has  not  been  accurately  decsribed  or  there  has  been  some  mistake 
in  the  description,  parol  evidence  is  admissible  to  show  that  it 
represents  the  same  debt  that  was  intended  to  be  secured  by  the 
mortgage. 

It  has  also  been  held  that  mortgages  may  secure  not  only  an 
indebtedness  described  therein,  but  future  advances  to  be  made 
by  the  mortgagee  to  the  mortgagor,  and  our  statute  authorizes  the 
giving  of  a  mortgage  to  indemnify  a  surety  or  guarantor,  and 
parol  evidence  may  be  admitted  to  show  the  extent  of  the  liability. 
But  in  all  of  these  cases  the  debt  secured  is  the  original  debt  in 
contemplation  of  the  parties  at  the  time  the  mortgage  was  given, 
and  not  a  new,  separate  and  independent  indebtedness. 

The  precise  question  as  to  whether  parties  may  by  agreement 
extend  a  mortgage,  which  by  its  terms  is  intended  to  secure  a  par- 
ticular indebtedness,  so  as  to  make  it  cover  another  and  different 
indebtedness,  has  not  been  squarely  passed  upon  by  our  Supreme 
Court.  The  court,  however,  has  in  several  cases  intimated  that 
parol  evidence  could  not  be  admitted  to  show  that  another  and 
different  debt  from  that  described  in  the  mortgage  was  secured 
by  the  mortgage.  The  Georgia  Court  of  Appeals  has  held : 

"Parol  evidence  is  inadmissible  to  extend  or  increase  the 
amount  of  indebtedness  specifically  secured  by  a  mortgage,  where 
the  mortgage  does  not  show  that  it  was  given  to  secure  future 
advances.  Evidence  that  a  mortgage  was  intended  to  secure  a 
note  not  specified  in  it  is  properly  repelled,  in  the  absence  of  an 
averment  that,  by  reason  of  fraud,  accident,  or  mistake,  the  cor- 


384  PARK'S  BANKING  LAW  OF  GEORGIA. 

rect  amount  was  not  stated."     Kight  v.  Robinson,  10  Ga.  App. 
548  (1). 

The  only  difference  between  the  case  just  quoted  and  the  facts 
stated  is  that  in  the  note  given  by  the  mortgagor  there  is  a  re- 
cital that  it  is  intended  to  be  secured  by  the  mortgage,  but  ia  my 
opinion  this  is  not  sufficient  to  change  the  rule  as  stated  by  the 
court.  I  am  of  the  opinion  that  the  mortgage  having  been  given 
to  secure  a  specified  indebtedness,  and  containing  no  language 
showing  that  it  was  the  intention  of  the  parties  that  any  other 
debt  might  or  could  be  covered  by  it,  the  mortgage  was  limited  to 
the  specified  indebtedness,  and  could  not  be  made  to  include  an- 
other debt  not  in  contemplation  of  the  parties  at  the  time  it  was 
given  by  a  simple  entry  on  the  note  to  that  effect. 


Mortgage  by  Agreement  May  Cover  Additional  Indebtedness. 

Where  a  mortgage  recites  that  it  is  given  to  secure  the  described  notes 
and  that  it  will  be  satisfied  only  on  payment  of  these  notes  and  others  to 
be  made  later  during  the  year,  is  it  good  security  for  another  note  made 
after  the  execution  of  the  mortgage  but  during  the  year  specified  in  the 
instrument  ? 

One  of  the  requisites  of  a  mortgage  is  that  it  shall  describe  the 
debt  it  is  intended  to  secure,  but  it  is  not  essential  that  there 
should  be  an  accurate  and  specific  description  of  the  debt.  A 
mortgage,  for  instance,  may  be  given  to  indemnify  a  surety 
against  any  loss  growing  out  of  a  particular  transaction,  and  from 
the  nature  of  the  case  it  would  be  impossible  accurately  to  de- 
scribe the  indebtedness  intended  to  be  secured.  So  it  has  been 
held  that  a  mortgage  may  be  given  to  secure  advances  to  be  made 
by  the  mortgagee  to  the  mortgagor  for  the  purpose  of  carrying  on 
the  farm  of  the  mortgagor  during  a  particular  year.  Allen  v. 
Lathrop,  46  Ga.  133.  I  think,  therefore,  that  in  the  particular 
case  mentioned  the  mortgage  would  secure  not  only  the  two  notes 
specifically  described  in  it,  but  other  notes  given  during  the  year. 
This  might  depend  somewhat  on  the  language  of  the  mortgage, 
but  if  it  showed  on  its  face  that  it  was  intended  to  secure  not  only 
the  notes  specifically  described  but  any  other  notes  which  might 
be  given  by  the  mortgagor  to  the  mortgagee  during  a  particular 
year,  there  can  be  but  little  doubt  that  it  would  be  valid  as  security 
for  the  entire  indebtedness. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  385 

Holder  of  Bond  for  Title  May  Mortgage  His  Interest. 

Can  the  holder  of  a  bond  for  title  mortgage  his  interest  in  the  property? 

The  holder  of  a  bond  for  title  can  give  a  mortgage  which  would 
attach  to  his  equity  in  the  property  covered  by  the  bond.  In  order 
for  the  mortgagee  to  realize  on  the  debt,  it  would  usually  be 
necessary  that  he  should  pay  off  the  balance  of  the  purchase 
money;  but  on  doing  this,  he  could  collect  not  only  the  purchase 
money  paid,  but  the  amount  of  his  mortgage,  supposing  of  course 
the  property  was  of  sufficient  value.  The  mortgage  creditor  of 
the  holder  of  the  bond  could,  by  proper  proceedings,  subject  to 
the  payment  of  his  debt,  whatever  equity  the  holder  of  the  bond 
might  have  in  the  property. 


The  Holder  of  a  Purchase-Money  Mortgage  on  Personal 
Property  Can  Subject  the  Property  in  the  Hands  of  a 
Second  Purchaser  from  the  Original  Vendor  Where  Mort- 
gage Is  Duly  Recorded. 

A  live  stock  dealer  sells  two  horses,  taking  a  mortgage  for  the  purchase 
money,  and  deposits  the  mortgage  note  as  collateral  with  a  bank.  The 
bank  notifies  the  maker  of  the  note  that  it  holds  the  paper.  Before  the 
note  becomes  due,  the  maker  returns  the  horses  to  the  dealer,  taking  a 
receipt  against  the  note.  The  dealer  then  sells  the  horses  to  another  party. 
The  mortgage  is  recorded  soon  after  it  is  given.  The  original  purchaser 
is  insolvent,  and  the  live  stock  dealer  is  likewise  in  bad  financial  condi- 
tion. Can  the  bank  follow  the  horses  in  the  hands  of  the  second  purchaser 
and  make  the  money  on  the  mortgage  note? 

The  question  presents  a  good  many  difficulties.  It  is  my 
opinion  that  the  bank  can  subject  the  horses  to  the  pay- 
ment of  the  mortgage.  The  original  purchaser  could  not  re- 
lieve himself  from  liability  by  the  return  of  the  horses, 
unless  he  took  up  the  note.  The  bank  holding  the  note  as  col- 
lateral is  in  the  same  position  as  though  it  had  purchased  the 
paper  outright.  The  live-stock  dealer  had  no  right  to  settle  the 
note  with  the  original  purchaser  without  accounting  to  the  bank. 
Whatever  lien  he  had  had  been  transferred  to  the  bank,  and  he  had 
no  more  right  to  take  the  horses  and  cancel  the  debt  than  any 
other  person  would  have  had,  unless,  of  course,  the  bank  author- 
ized him  to  collect  papers  for  it.  In  the  absence  of  authority 
from  the  bank  to  collect,  I  do  not  think  he  could  change  the  status 
of  affairs.  The  mortgage  covered  the  stock,  and  would  follow 
it  in  the  hands  of  any  purchaser.  If  the  original  purchaser 
25 


386  PARK'S  BANKING  LAW  OF  GEORGIA. 

sold  to  a  third  party,  the  bank  could  still  follow  the  stock.  The 
fact  that  he  in  effect  sold  or  turned  the  stock  back  to  the  seller 
would  not  cancel  the  mortgage  or  affect  the  lien  in  any  way.  It 
is,  of  course,  a  hardship  on  the  second  purchaser  to  allow  the 
bank  to  follow  the  stock  in  his  hands.  He  might  very  well  urge 
that  he  did  not  know  of  the  mortgage,  and  had  no  way  of  find- 
ing it  out,  because  he  might  search  the  records  critically,  and 
would  hardly  find  the  mortgage.  Still,  the  bank  could  do  nothing 
more  to  protect  itself  than  to  see  that  the  mortgage  was  recorded ; 
and  to  allow  the  mortgagor  to  sell  the  mortgaged  property  to  an 
innocent  purchaser,  and  thereby  defeat  the  lien  of  the  mort- 
gage,, would  destroy  the  effectiveness  of  our  recording  statutes 
and  greatly  lessen  the  value  of  chattel  mortgages. 

The  bank  can  perhaps  do  nothing  to  strengthen  its  position 
until  the  paper  becomes  due.  When  it  is  due,  the  bank  would  be 
justified  in  foreclosing  the  mortgage  and  levying  on  the  .stock, 
though  as  stated  in  the  beginning  this  seems  a  hardship  on  the 
purchaser,  and  the  bank  will  probably  find  its  claim  vigorously 
contested.  The  question  seems  to  be  a  new  one  so  far  as  the 
reported  cases  in  this  State  are  concerned. 


Mortgage  on  Personalty  Properly  Recorded  Does  Not  Have  to 
Be  Re-recorded  Where  Mortgagor  Changes  Residence  to 
Another  County. 

If  a  dealer  sells  mules  to  a  party  living  in  one  county,  taking  a  mort- 
gage which  is  duly  recorded,  but  before  the  maturity  the  purchaser  moves 
to  another  county,  and  there  gives  another  mortgage  on  the  mules  which  is 
recorded  in  that  county,  is  the  first  mortgage  superior  to  the  second? 

The  Code  provides  that  "mortgages  on  personalty  must  be  re- 
corded in  the  county  where  the  mortgagor  resided  at  the  time  of 
the  execution  if  a  resident  of  this  State,"  also  that  "all  chattel 
mortgages  of  stocks  of  goods,  wares  and  merchandise,  or  other 
personal  property  shall  be  recorded  in  case  the  same  is  upon 
property  or  goods  located  in  some  other  county  than  that  of  the 
mortgagor's  residence,  in  the  county  where  the  goods  or  personal 
property  is  located  at  the  time  of  the  execution  of  the  mortgage, 
in  addition  to  the  record  of  the  mortgage  in  the  county  of  the 
mortgagor's  residence."  Park's  Ann.  Code,  §  3259. 

It  will  be  seen  from  this  section  that  the  mortgage  does  not 
have  to  be  re-recorded  on  the  change  of  the  domicile  of  the  mort- 


OPINIONS  OF  THE  GENERAL  COUNSEL.  387 

gagor.  Where  the  mortgage  is  properly  recorded  at  the  time  of 
its  execution  it  will  not  lose  its  lien  by  the  removal  of  the  mort- 
gagor to  another  county. 


Rank  of  Mortgages  with  Other  Liens. 

What  liens  or  claims  take  precedence  over  mortgages? 
Mortgages  are  inferior  to  the  following  liens: 

(a)  Taxes. 

(b)  The  general  and  special  liens  of  laborers. 

(c)  The  landlord's  special  lien  on  crops  for  rent  and  for  sup- 
plies furnished. 

(d)  Mechanics'  liens  for  work  done  and  material  furnished 
when  no  notice  has  been  communicated  before  the  work  was  done 
or  materials  furnished. 

(e)  Of   course,  mortgages  are  inferior  to  judgments,  other 
mortgages  arid  liens  of  various  kinds  which  are  of  older  date  and 
recorded  as  required  by  statute,  or  in  the  case  of  contract  liens 
of  which  the  mortgagee  has  actual  notice,  except  mortgages  on 
crops  for  money,  supplies  or  other  articles  of  necessity  including 
live  stock,  to  aid  in  making  and  gathering  such  crops  which  are 
superior  to  judgments  of  older  date  than  such  mortgages  on  the 
crop  for  the  year  in  which  the  advances  were  made. 

Mortgages  are  also  inferior  to  the  year's  support  allowed  by 
statute  to  the  widow  and  minor  children  of  a  deceased  person ; 
and,  unless  it  is  waived,  to  a  homestead,  except  in  cases  where 
the  mortgage  is  given  for  the  purchase  money  thereof,  or  for  the 
removal  of  incumbrances  thereon. 


Corporate  Stock  Is  Not  the  Subject  of  Mortgage  in  the 
Ordinary  Sense. 

Can  a  mortgage  be  given  on  shares  of  corporate  stock? 

I  am  unable  to  find  any  case  decided  by  the  Georgia  courts  on 
this  subject.  The  following  quotations,  however,  from  two  of  the 
leading  authorities  on  corporations  are  illuminating: 

"The  use  of  the  terms  'mortgage,'  'pledge,'  etc.,  as  applied 
to  shares  is  more  likely  to  mislead  than  instruct.  From  the  fact 
that  shares  held  as  collateral  security  are  said  by  one  court  to 
be  'pledged,'  and  by  another  to  be  'mortgaged,'  no  inference  can 


388  PARK'S  BANKING  LAW  OF  GEORGIA. 

safely  be  drawn  that  the  rights  of  the  parties  would  be  held  to 
be  different  by  the  two  tribunals.  Terms  which  are  useful  as 
applied  to  charges  upon  land  or  personal  chattels  are  worse  than 
useless  as  applied  to  shares.  Hence,  to  discuss  which  charges 
or  liens  upon  shares  in  a  corporation  are  properly  denominated 
'mortgages'  and  which  'pledges'  would  be  largely  a  waste  of  time 
and  battle  about  words.  The  term  'pledge'  is  frequently  used  in 
this  work,  for  want  of  a  better  word,  to  designate  a  charge  or 
lien  upon  shares ;  but  the  word  is  used  as  a  generic  term  and  not 
in  any  technical  sense,  as  distinguished  from  a  mortgage,  equita- 
ble charge,  or  security  of  a  different  nature.  All  such  classifica- 
tions will  be  disregarded  as  unfortunate  and  misleading;  and 
in  lieu  thereof  a  classification  suited  to  the  peculiarities  of  shares 
in  incorporated  companies  will  be  adopted. 

"Charges  or  liens  upon  shares  may,  then,  be  divided  into  five 
classes:  (1)  where  there  is  an  agreement,  oral  or  written,  that 
the  shares  shall  be  held  as  security  for  a  debt,  no  formal  transfer 
being  executed  and  the  indicia  of  ownership,  notably  the  share- 
certificate,  being  retained  in  the  possession  of  the  debtor;  (2) 
where  the  share-certificate  is  delivered  to  the  creditor  but  without 
any  transfer  or  endorsement  sufficient  to  enable  the  creditor  to 
have  himself  registered  as  the  owner  or  to  sell  the  shares  in  the 
market,  without  some  further  act  on  the  part  of  the  debtor;  (3) 
where  the  certificate  is  delivered  to  the  debtor  coupled  with  a 
transfer  or  blank  endorsement;  (4)  where  the  shares  are  trans- 
ferred to  the  creditor  on  the  books  of  the  company  but  coupled 
with  an  entry  indicating  that  they  are  held  as  collateral  security 
merely,  and  (5)  where  the  shares  are  transferred  to  the  creditor 
on  the  company's  books,  no  entry  being  made  to  indicate  that  they 
are  held  as  collateral  security  and  no  communication  of  the  fact 
being  made  to  the  company."  1  Machen  on  Corp.,  pp.  803,  804. 

"Shares  of  stock  may  be  the  subject  of  a  mortgage  or  pledge. 
A  collateral  trust  indenture  is  often  made  to  cover  stock  as  se- 
curity for  a  debt,  but  such  an  instrument  would  hardly  be  called 
a  mortgage.  In  fact  a  mortgage  of  stock  is  not  often  made,  and, 
unless  there  is  a  clear  intent  to  the  contrary,  the  courts  will  treat 
the  transaction  as  a  pledge  rather  than  a  mortgage.  In  fact  it  is 
difficult  to  ascertain  from  the  cases  how  shares  of  stock  may  be 
mortgaged ;  and  transactions  which,  in  a  few  early  decisions, 
were  held  to  be  mortgages,  would  to-day  be  held  to  be  pledges. 
There  are  but  few  clear  cases  of  a  mortgage  of  stock  to  be  found. 
It  seems  that  a  formal  instrument  of  chattel  mortgage  of  stock, 
duly  executed  and  registered  at  the  municipal  clerk's  office,  as 
required  by  law  in  case  of  chattel  mortgages,  would  not  consti- 
tute an  effectual  mortgage  of  stock,  and  the  mortgagee  would  not 
be  protected  where  he  does  not  receive  the  certificate  of  stock 
from  the  mortgagor,  or  does  not  obtain  a  registry  of  transfer  on 
the  corporate  books."  2  Cook  on  Corp.,  pp.  1181-1183. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  389 

The  Code  of  Georgia  provides  that  a  mortgage  may  embrace 
all  property  in  possession  or  to  which  the  mortgagor  has  the 
right  of  possession.  Shares  of  stock  are  personal  property,  at 
least  in  a  qualified  sense.  I  think,  therefore,  that  a  lien  in  the 
form  of  a  mortgage  might,  perhaps,  be  created  upon  shares  of 
stock  in  Georgia. 

I  do  not  think,  however,  that  the  record  of  such  a  mortgage 
would  constitute  notice.  Corporate  stock  is  quasi  negotiable  in 
character.  After  being  endorsed  in  blank  it  may  be  transferred 
freely  from  hand  to  hand  practically  as  a  negotiable  instrument, 
and  the  purchaser  or  pledgee  thereof  can  hold  regardless  of  a 
judgment  against  the  original  owner,  although  that  judgment  may 
have  been  entered  prior  to  the  transfer.  If  a  judgment  is  no  lien 
on  the  stock  it  would  certainly  seem  that  a  mortgage,  even  duly 
recorded,  would  not  create  a  lien  on  the  stock  as  against  one  sub- 
sequently taking  it,  with  no  actual  notice  of  such  mortgage. 

The  Supreme  Court  of  Kentucky  has  held  in  the  case  of 
Spalding  v.  Paine,  81  Ky.  416,  that  a  mortgage  of  stock  duly  re- 
corded was  not  effective  as  against  a  subsequent  bona  fide  pur- 
chaser of  the  stock.  The  reason  for  this  rule  is  clearly  stated  by 
the  court  in  the  following  language : 

"Much  of  the  business  of  the  country  is  conducted  on  the  faith 
of  the  pledge  of  such  stock  as  collateral ;  and  to  adjudge  that  the 
holder  of  the  stock  by  transfer  on  the  books  of  the  corporation, 
or  by  indorsement  and  delivery  by  the  owner,  is  subordinate  in 
his  claim  to  the  mortgagee,  upon  the  doctrine  of  constructive 
notice,  would  paralyze  trade  and  open  a  wide  field  for  the  fraudu- 
lent disposition  of  such  valuable  interests  at  the  expense  of 
honest  and  confiding  purchasers." 

Where  a  mortgage  is  given  on  stock  before  it  had  been  pledged 
as  collateral  security  I  do  not  think  the  mortgage  would  hold  as 
against  the  claim  of  the  pledgee,  unless  the  pledgee  had  actual 
notice  of  the  mortgage  when  he  received  the  stock  as  collateral 
security. 


Mortgage  on  Property  of  Corporation  Is  Superior  to  Claim 
of  Pledgee  of  Its  Stock. 

Is  a  mortgage  given  by  a  corporation  on  its  physical  property  and  tangi- 
ble assets  superior  to  the  claim  of  holder  of  stock  in  the  corporation 
pledged  as  collateral? 

The  mortgage  is  superior.  All  creditors  of  the  corporation 
must  be  paid  before  the  stockholders  have  any  interest  in  its  prop- 


390  PARK'S  BANKING  LAW  OF  GEORGIA. 

efty,  and  the  pledge  of  the  stock  can,  of  course,  carry  no  greater 
right  to  the  pledgee  than  the  stockholder  himself  has  in  the  cor- 
poration or  its  assets. 


Principal  Debtor  Cannot  Enforce  a  Mortgage  Given  to 
Secure  an  Indorse r. 

A  bank  makes  a  loan,  taking  therefore  a  note  indorsed  by  the  president 
of  the  bank  in  whose  favor  a  mortgage  is  executed  by  the  debtor  for  the 
purpose  of  securing  the  indorsement.  The  bank  subsequently  renews  the 
note  without  the  indorsement.  The  president  of  the  bank  transfers  and 
assigns  the  mortgage  to  the  bank  with  the  right  to  control  and  foreclose 
it.  Can  the  bank  legally  foreclose  the  mortgage? 

There  are  two  separate  and  distinct  debts.  The  first  is  the 
debt  owed  by  the  debtor  to  the  bank.  This  is  not  secured  by  the 
mortgage.  The  second  is  the  debt  which  would  be  owed  by  the 
debtor  to  the  president  of  the  bank  who  indorsed  his  note,  if 
and  when  the  president  should  be  called  on  to  pay  the  note  which 
he  indorsed.  This  is  the  debt  which  the  mortgage  was  given  to 
secure.  The  mortgage  was  given  to  secure  a  future  contingent 
liability  and  could  not  be  inforced  against  the  debtor  until  the 
liability  became  fixed. 

I  quote  from  27  Cyclopedia  of  Law  and  Procedure,  p.  1411 : 

"A  mortgage  given  to  secure  or  indemnify  an  indorser  or  surety 
for  a  note  covers  any  renewal  of  the  note  if  the  indemnitee's  lia- 
bility on  it  continues." 

Again : 

"A  mortgage  given  to  indemnify  the  mortgagee  against  loss  or 
damage  by  reason  of  a  liability  which  he  has  assumed  for  the 
benefit  of  the  mortgagor  as  guarantor,  surety,  indorser,  or  other- 
wise, can  not  be  enforced  by  foreclosure  or  sale  of  the  property 
pledged  until  the  mortgagee  has  been  actually  damnified  by  pay- 
ing the  debt  or  obligation  assumed,  or  at  least  until  he  has  become 
immediately  and  absolutely  liable  for  its  payment  to  a  fixed 
amount,  so  that  the  fact  and  the  extent  of  the  injury  sustained 
by  him  are  definitely  fixed.  *  *  *  Where  a  surety  holds  a 
note  and  mortgage  for  purposes  of  indemnity,  and  assigns  the 
same,  his  assignee  cannot  enforce  the  mortgage  until  the 'mort- 
gagee has  paid  the  debt  for  which  he  was  surety  or  has  in  some 
way  been  damnified."  27  Cyc.  1067. 

Under  this  authority,  the  bank  is  not  entitled  to  foreclose  the 
mortgage. 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  391 

NATIONAL  BANKS. 


Officers  of  National  Bank  Not  Punishable  Under  State 
Banking  Statutes. 

When  a  state  law  provides  for  punishment  of  directors  and  bankers, 
does  it  apply  to  the  directors  and  officers  of  national  banks? 

The  question  seems  to  have  been  answered  by  the  Supreme 
Court  of  the  United  States  in  the  case  of  Easton  v.  State  of  Ohio, 
188  U.  S.  220,  47  L.  Ed.  452,  from  which  I  quote: 

"Congress,  having  the  power  to  create  a  system  of  national 
banks,  is  the  judge  as  to  the  extent  of  the  powers  which  should 
be  conferred  upon  such  banks,  and  has  the  sole  power  to  regulate 
and  control  the  exercise  of  their  operations.  *  *  * 

"Undoubtedly  a  State  has  the  legitimate  power  to  define  and 
punish  crimes  by  general  laws  applicable  to  all  persons  within  its 
jurisdiction.  So  likewise  it  may  declare,  by  special  laws,  certain 
acts  [such  as  the  receipt  of  deposits  when  bank  is  insolvent]  to  be 
criminal  offenses  when  committed  by  officers  or  agents  of  its  own 
banks  and  institutions.  But  it  is  without  lawful  power  to  make 
such  special  laws  applicable  to  banks  organized  and  operating 
under  the  laws  of  the  United  States." 

State  laws  making  penal  certain  offenses  committed  by  bank 
officers  or  bank  employes  are,  therefore,  not  applicable  to  national 
banks.  For  instance,  it  has  been  held  that  an  officer  of  a  national 
bank  can  not  be  punished  under  State  laws  for  embezzling  the 
funds  of  the  bank.  Commonwealth  v.  Felton,  101  Mass.  204; 
Commonwealth  v.  Ketner,  92  Pa.  St.  372;  People  v.  Fonda,  62 
Mich.  401. 


National    Banks    Prohibited   from   Holding    Stock   in    State 

Banks. 

May  a  national  bank  own  and  hold  stock  in  a  state  bank? 

A  national  bank  has  no  authority  to  become  a  stockholder  in  a 
State  bank  or  other  corporation.  This  has  been  distinctly  held 
by  the  Supreme  Court  of  the  United  States  in  several  cases.  I 
quote  from  one  of  them: 

"Stock  of  a  savings  bank,  not  taken  as  security  or  acquired  in 
the  course  of  the  business  of  banking,  cannot  be  purchased  or 
dealt  in  by  a  national  bank."  California  National  Bank  v.  Ken- 
nedy, 167  U.  S.  362,  42  L.  Ed.  198. 


392  PARK'S  BANKING  LAW  OF  GEORGIA. 

In  discussing  the  case,  the  court  said : 

"It  is  settled  that  the  United  States  statutes  relative  to  national 
banks  constitute  the  measure  of  the  authority  of  such  corpora- 
tions, and  that  they  can  not  rightfully  exercise  any  powers  except 
those  expressly  granted  or  which  are  incidental  to  carrying  on 
the  business  for  which  they  are  established.  Logan  County  Nat. 
Bank  v.  Townsend,  139  U.  S.  67,  73.  No  express  power  to  ac- 
quire the  stock  of  another  corporation  is  conferred  upon  a  na- 
tional bank,  but  it  has  been  held  that,  as  incidental  to  the  power 
to  loan  money  on  personal  security,  a  bank  may  in  the  usual 
course  of  doing  such  business  accept  stock  of  another  corporation 
as  collateral,  and  by  the  inforcement  of  its  rights  as  pledgee  it 
may  become  the  owner  of  the  collateral  and  be  subject  to  liability 
as  other  stockholders.  *  *  * 

"The  power  to  purchase  or  deal  in  stock  of  another  corpora- 
tion, as  we  have  said,  is  not  expressly  conferred  upon  national 
banks,  nor  is  it  an  act  which  may  be  exercised  as  incidental  to 
the  powers  expressly  conferred." 


Borrowing  Power  of  National  Banks. 

Can  a  national  bank  borrow  a  sum  greater  than  the  capital  stock  of  the 
bank,  and  are  rediscounts  counted  as  liabilities? 

Section  5202  of  the  U.  S.  Revised  Statutes  with  amendments 
is  as  follows: 

"No  national  banking  association  shall  at  any  time  be  indebted 
or  in  any  way  liable  to  an  amount  exceeding  the  amount  of  its 
capital  stock  at  such  time,  actually  paid  in,  and  remaining  undi- 
minished  by  losses  or  otherwise,  except  on  account  of  demands  of 
the  nature  following: 

"1st.  Notes  of  circulation. 

"2d.  Moneys  deposited  with  or  collected  by  the  association. 

"3d.  Bills  of  exchange  or  drafts  drawn  against  money  actually 
on  deposit  to  the  credit  of  the  association  or  due  thereto. 

"4th.  Liabilities  to  the  stockholders  of  the  association  for  divi- 
dends and  reserve  profits. 

"5th.  Liabilities  incurred  under  the  provisions  of  the  Federal 
Reserve  Act. 

"6th.  Liabilities  incurred  under  the  provisions  of  the  War  Fi- 
nance Corporation  Act. 

"7th.  Liabilities  created  by  the  endorsement  of  accepted  bills  of 
exchange  payable  abroad  actually  owned  by  the  indorsing  bank 
and  discounted  at  home  or  abroad."  U.  S.  Comp.  Stat.  §  9764,  as 
amended  by  Act  of  October  22,  1919. 

The  reading  of  this  section  will  show  that  the  intent  of  the  law 
is  to  limit  liability  of  every  kind  and  character  to  an  amount  not 


OPINIONS  OF  THE  GENERAL  COUNSEL.  393 

exceeding  the  capital  of  the  bank,  except  for  the  seven  specified 
demands.  Rediscounts  are  treated  by  the  comptroller,  as  within 
this  rule,  as  are  also  certificates  of  deposit  given  for  borrowed 
money. 


National  Banks  May  Discount  Paper  at  the  Highest  Rate  of 
Interest  Permitted  by  State  Law  Reserved  in  Advance. 

Can  a  national  bank  in  Georgia  deduct  interest  in  advance  from  a  loan 
made  at  the  rate  of  eight  per  cent,  per  annum? 

The  question  has  been  decided  by  the  Georgia  Court  of  Ap- 
peals. I  quote  from  the  decision: 

"The  provisions  of  the  acts  of  Congress  constitute  the  ultimate 
authority  relative  to  the  operation  of  national  banks,  and  the  de- 
cisions of  the  Supreme  Court  of  the  United  States  will  be  fol- 
lowed by  the  State  courts  in  the  construction  of  those  statutes. 

"The  national  bank  laws  of  Congress  adopted  as  the  author- 
ized rate  of  interest  that  permitted  by  the  laws  of  the  several 
States  where  such  banks  might  be  located ;  but  Congress  did 
not  adopt  the  prohibition  imposed  by  the  Georgia  statute  upon 
the  taking  of  interest  at  the  highest  authorized  rate  in  advance 
by  way  of  discount,  but  on  the  contrary,  by  §  5197  of  the  Revised 
Statutes,  specifically  authorizes  national  banks  to  reserve,  on  any 
discount  made,  interest  at  the  rate  allowed  by  the  laws  of  the 
several  States."  Cooper  et  al.,  Receivers,  v.  National  Bank  of 
Savannah,  21  Ga.  App.  356  (1  and  2). 

The  Supreme  Court  of  Georgia  denied  a  petition  for  certiorari 
to  review  this  case,  indicating  that  it  believed  the  case  correctly 
decided. 

The  case  was  then  carried  to  the  Supreme  Court  of  the  United 
States  and  the  decision  of  the  Court  of  Appeals  of  Georgia  af- 
firmed. Evans,  Receiver,  v.  National  Bank  of  Savannah,  — 
U.  S.  — ,  34  Sup.  Ct.  58,  64  L.  ed.  69. 

Mr.  Justice  McReynolds,  speaking  for  that  court,  said  that  the 
court  thought  "Congress  intended  to  endow  national  banks  with 
the  power  which  banks  generally  exercise  of  discounting  notes, 
reserving  charges,  at  the  highest  rate  permitted  for  interest."  He 
added  "to  carry  out  this  purpose,  the  National  Bank  Act  provides 
that  associations  organized  under  it  may  reserve  on  any  discount 
interest  at  the  rate  allowed  by  the  State." 

In  Georgia  the  legal  rate  of  interest  is  seven  per  cent,  where 
the  rate  is  not  named  in  the  contract,  and  any  higher  rate  must 


394  PARK'S  BANKING  LAW  OF  GEORGIA. 

be  specified  in  writing,  but  in  no  event  shall  the  rate  exceed  eight 
per  cent,  per  annum.  Park's  Ann.  Code,  §  3426. 

The  taking  or  reserving,  directly  or  indirectly,  any  greater  sum 
for  the  use  of  money  is  denominated  usury.  Park's  Ann.  Code, 
§  3427. 

It  is  also  provided : 

"It  shall  not  be  lawful  for  any  person,  company,  or  corporation 
to  reserve,  charge,  or  take  for  any  loan  or  advance  of  money, 
or  forbearance  to  enforce  the  collection  of  any  sum  of  money, 
any  rate  of  interest  greater  than  eight  per  centum  per  annum, 
either  directly  or  indirectly  by  way  of  commission  for  advances, 
discount,  exchange,  or  by  any  contract  or  contrivance  or  device 
whatever."  Park's  Ann.  Code,  §  3436. 

Under  this  last  section,  the  Supreme  Court  of  Georgia  in  the 
case  of  Logansville  Banking  Company  v.  Forrester,  143  Ga.  302, 
held  that  "the  reserving  of  interest  in  advance  by  a  bank  at  the 
highest  legal  rate  of  interest  on  a  loan,  whether  it  be  a  short  or  a 
long  term  loan,  is  usurious."  Under  this  decision,  banks  organ- 
ized under  the  laws  of  Georgia  can  not  deduct  interest  at  eight 
per  cent,  in  advance  even  on  short  time  paper.  But  under  the 
United  States  Revised  Statutes,  which  authorize  national  banks  to 
take,  receive,  reserve  and  charge  on  any  loan  or  discount  interest 
at  the  highest  rate  allowed  by  the  laws  of  the  State  in  which  the 
bank  is  located,  and  which  further  provide  that  "such  interest 
may  be  taken  in  advance",  the  Court  of  Appeals  held  that  a  na- 
tional bank  was  authorized  to  discount  paper  at  eight  per  cent. 
All  doubt  upon  the  question  has  now  been  set  at  rest  by  the  de- 
cision of  the  United  States  Supreme  Court. 

It  will  readily  be  seen,  therefore,  that  the  national  banks  enjoy 
an  advantage  over  the  State  banks  in  the  matter  of  interest.  It 
was  to  meet  this  situation  and  to  place  the  State  banks  on  a  parity 
with  the  national  banks  that  Section  17  of  Article  19  was  in- 
serted in  the  Banking  Act  of  1919.  This  section  as  originally 
framed  provided: 

"Any  bank  may  take,  receive,  reserve  and  charge  on  any  loan 
or  advance  of  money  or  forbearance  to  enforce  the  collection  of 
money,  interest  at  the  legal  rate,  and  such  interest  may  be  taken  in 
advance,  reckoning  the  days  from  which  the  note,  bill,  or  other 
evidence  of  debt  has  to  run ;  provided  that  such  interest  deducted 
in  advance  shall  not  be  for  a  longer  period  than  one  year;  and 
the  purchase,  discount  or  sale  of  a  bona  fide  bill  of  exchange, 
payable  at  another  place  than  the  place  of  said  purchase,  discount 
or  sale,  at  not  more  than  the  current  rate  of  exchange  for  sight 


OPINIONS  OF  THE  GENERAL  COUNSEL.  395 

drafts  in  addition  to  the  interest,  shall  not  be  considered  as  taking 
or  receiving  a  greater  rate  of  interest." 

Had  it  been  adopted  in  this  form,  State  banks  as  well  as  na- 
tional banks  would  have  had  the  privilege  of  discounting  paper 
at  eight  per  cent.  The  legislature,  however,  amended  the  section 
so  as  to  read  as  follows : 

Sec.  19.  "Any  bank  may  take,  receive,  reserve  and  charge  on 
any  loan  or  advance  of  money  or  forbearance  to  enforce  the 
collection  of  money,  interest  at  not  exceeding  eight  per  cent. 
(8%)  per  annum." 

In  this  form,  as  it  was  finally  adopted,  the  section  made  no 
change  in  the  law.  State  banks  may  charge  interest  at  eight 
per  cent.,  but  can  not  deduct  such  interest  in  advance  by 
way  of  discount.  Fortunately,  the  legislature  by  the  Act  of  1916 
substituted  for  the  penalties  imposed  for  the  exaction  of  usury 
the  forfeiture  of  the  entire  interest  charged  or  taken,  and  pro- 
vided that  no  further  penalty  or  forfeiture  should  be  occasioned 
thereby.  Before  the  passage  of  this  act  titles  tainted  with  usury 
were  void.  Since  the  act  went  into  effect,  the  penalty  is  simply 
the  forfeiture  of  the  entire  interest,  and  titles,  though  infected 
with  usury,  are  no  longer  void.  Park's  Ann.  Code,  Sup.  1917, 
§§  3438,  3438(a). 

It  is  unfortunate,  however,  that  national  banks  in  Georgia 
should  be  accorded  greater  privileges  than  the  State  allows  to  her 
own  banks. 


NOTES. 


All  Persons  Jointly  Liable  Must  Be  Sued  Together. 

Can  one  maker  of  a  joint  note  be  sued  alone,  without  joining  the  others? 
I  quote  from  the  decision  of  the  Supreme  Court  of  Georgia  in 
Lippincott  v.  Behre,  122  Ga.  546: 

"If  the  liability  is  joint,  then  all  those  jointly  liable  must  be 
sued.  Plaintiff  has  no  right  to  impose  upon  one  the  burden  of  a 
single  obligation  which  was  assumed  not  severally,  but  jointly. 
He  cannot  sue  some  of  the  contracting  parties,  where  all  are  liable 
as  a  unit,  except  in  those  cases  where  the  statute  itself  has  made 
the  exception." 

The  statute  referred  to  provides  that  where  some  of  the  joint 
obligors  are  nonresidents  or  cannot  be  found,  or  plead  infancy 
and  the  plea  is  sustained,  judgment  may  be  taken  against  the 
other  parties. 


396  PARK'S  BANKING  LAW  OF  GEORGIA. 

Most  promissory  notes,  however,  are  joint  and  several.  A  note 
reading,  "I,  we,  or  either  of  us"  is  a  joint  and  several  note.  So 
notes  reciting  the  words  "jointly  and  severally,"  or  some  similar 
expression,  are  joint  and  several  notes.  Where  notes  are  joint 
and  several,  all  the  obligors  may  be  sued  or  any  one  of  them. 
Reference  to  Park's  Ann.  Code,  §  4270,  will  explain  somewhat 
the  difference  between  joint,  and  joint  and  several  notes. 


A  Nonresident  Indorser  Cannot  Be  Sued  in  Same  Action  with 
Resident  Maker. 

Is  it  necessary  to  sue  in  one  action  the  maker  of  a  simple  promissory 
note,  who  resides  in  Georgia,  and  an  indorser  on  the  note,  who  resides  in 
another  State? 

While  under  our  statute  the  maker  and  indorser  of  a  note,  who 
reside  in  different  counties,  may  be  sued  in  the  same  action  in 
the  county  of  the  residence  of  the  maker,  the  courts  of  Georgia 
have  no  jurisdiction  in  an  ordinary  suit  to  give  judgment  against 
a  nonresident.  Of  course,  if  the  nonresident  happened  to  be 
caught  in  the  State  of  Georgia,  he  could  be  sued  in  any  county  in 
which  he  could  be  served ;  but,  residing  out  of  the  State,  he  could 
only  be  sued  by  attachment  levied  on  any  property  which  he  might 
own  within  the  State,  or  by  service  of  garnishment  on  some 
resident  debtor  of  his  or  person  holding  property  for  him.  Suit 
would  have  to  be  brought  against  the  maker  in  Georgia,  and  in 
the  other  State  against  the  indorser,  unless  the  indorser  could  be 
caught  in  Georgia  and  served  while  within  the  State. 


Maker  and  Indorser  of  Promissory  Note  Cannot  Be  Sued 
Jointly  in  County  of  Indorser's  Residence. 

Can  both  the  indorser  and  the  maker  of  a  note  who  reside  in  different 
counties  be  sued  in  the  county  of  the  indorser's  residence? 

Suit  against  the  maker  and  the  indorser  cannot  be  brought  in 
the  county  where  the  indorser  resides.  Both  can  be  sued  in  the 
county  of  the  maker's  residence.  The  constitutional  provision 
embodied  in  §  6542  of  Park's  Ann.  Code  is  as  follows : 

"Suits  against  the  maker  and  indorser  of  promissory  notes,  or 
drawer,  acceptor  and  indorser  of  foreign  or  inland  bills  of  ex- 
change, or  like  instruments,  residing  in  different  counties,  shall 
be  brought  in  the  county  where  the  maker  or  acceptor  resides." 


OPINIONS  OF  THE  GENERAL  COUNSEL.  397 

Where  the  indorser  is  not  a  technical  indorser,  that  is,  one 
whose  indorsement  is  necessary  to  pass  title  to  the  instrument,  but 
is  merely  a  surety,  the  rule  is  different.  In  such  case  the  maker 
and  indorser  can  both  be  sued  in  the  county  of  the  indorser's  or 
surety's  residence. 


Reference  in  Face  of  Note  to  Contract  Under  Which  It  Is 
Issued  Does  Not  Affect  Its  Negotiability. 

An  entry  upon  the  face  of  a  promissory  note  recites  that  the  note  is 
one  of  a  series  subject  to  a  contract  of  given  date,  to  which  reference  is 
made.  Does  this  render  the  note  nonnegotiable? 

An  entry  of  this  character  upon  the  face  of  the  note  makes 
the  paper  referred  to  a  part  of  the  contract.  It  does  not  affect 
the  negotiability  of  the  note,  but  the  purchaser  is  put  on  notice 
of  any  fact  contained  in  the  paper  referred  to  which  might  be  a 
defense  to  the  note.  References  of  this  character  are  very  fre- 
quently found  in  purchase-money  notes,  rent  notes,  note  retain- 
ing title  to  property  sold,  and  notes  secured  by  mortgage  or  deed 
to  secure  debt.  The  fact  that  a  note  shows  upon  its  face,  or  by 
reference  to  another  paper,  what  its  consideration  is,  does  not  pre- 
vent it  from  being  negotiable,  nor  is  the  purchaser  charged  with 
notice  of  failure  of  consideration  or  put  on  any  inquiry  with 
regard  to  the  consideration  by  reason  of  such  a  statement  in  the 
body  of  the  note.  This  has  been  frequently  decided  by  the  Su- 
preme Court.  Bank  of  Commerce  v.  Barrett,  38  Ga.  126. 

The  effect  of  the  reference  is,  therefore,  to  embody  in  the  note 
the  terms  of  the  contract  referred  to ;  and  unless  there  is  some- 
thing in  the  contract  which  shows  that  the  note  is  conditional,  or 
that  the  consideration  upon  which  it  was  given  has  failed,  or  that 
the  consideration  is  illegal,  immoral,  or  against  public  policy,  or 
some  other  defense  of  this  character,  the  fact  that  the  note  re- 
fers to  the  contract  and  that  by  this  reference  the  consideration  is 
shown,  would  not  affect  its  negotiability,  nor  charge  the  purchaser 
with  any  secret  defense  which  the  maker  might  have  which  could 
not  be  ascertained  from  a  reading  of  the  contract.  Simmons  v. 
Council,  5  Ga.  App.  386. 


398  PARK'S  BANKING  LAW  OF  GEORGIA. 

Provision  for  Indefinite  Renewal  or  Extension  Renders 
Note  Nonnegotiable. 

Does  the  statement  in  a  note  that  the  indorser  consents  to  a  renewal  or 
extension  affect  the  negotiability  of  the  paper? 

I  am  inclined  to  think,  under  the  authorities,  that  the  state- 
ment that  the  indorser  consents  to  a  renewal  or  extension  ren- 
ders the  note  nonnegotiable. 

In  the  case  of  Woodbury  v.  Roberts,  59  Iowa  348,  13  N.  W.  312, 
the  note  under  consideration  contained  the  following  clause  :  "The 
makers  and  indorsers  of  this  obligation  further  expressly  agree 
that  the  payee  or  his  assigns  may  extend  the  time  of  payment 
thereof  from  time  to  time  indefinitely  as  he  or  they  may  see  fit." 
The  court  held  that  the  note  was  not  negotiable,  because  the  time 
of  payment  was  not  certain,  and  not  capable  of  being  made  cer- 
tain. 

In  the  case  of  City  National  Bank  v.  Gunter,  67  Kan.  227,  72 
Pac.  842,  a  note  provided  that  the  makers  and  indorsers  "agree  to 
all  extensions  and  partial  payments  before  or  after  maturity  with- 
out prejudice  to  holder,"  and  it  was  held  that  the  note  was  not  ne- 
gotiable, the  holding  being  based  on  the  same  ground  as  that  set 
out  by  the  Iowa  court  in  the  case  referred  to  above. 

The  Supreme  Court  of  Iowa,  however,  in  a  later  case,  lays 
down  the  rule  a  little  less  broadly.  The  notes  involved  in  that 
case  contained  the  following  provision :  "Sureties  hereby  consent 
that  the  time  of  payment  may  be  extended  from  time  to  time 
without  notice  thereof,"  and  the  court  said :  "We  may  concede 
that  in  the  case  of  an  instrument  providing  in  terms  for  extension 
of  time  of  payment  indefinitely,  there  is  such  uncertainty  as  to 
make  the  same  nonnegotiable.  But  in  the  notes  before  us,  we  have 
a  distinct  and  unqualified  agreement  on  the  part  of  the  makers 
to  pay  on  a  certain  date.  And  we  perceive  no  good  reason  for 
holding  that  the  negotiable  character  thereof  is  destroyed,  because 
of  a  clause  embodied  therein  providing  that  a  surety,  if  such  there 
shall  be,  will  not  claim  a  release  from  his  collateral  liability  on  the 
instrument,  if  forsooth  an  extension  of  time  shall  be  granted  the 
makers  without  notice  to  him."  Farmer  v.  Bank,  107  N.  W.  170. 

I  think  that  the  clause  stated  in  the  question  would  probably 
be  held  to  make  the  time  of  payment  of  the  note  uncertain,  and, 
for  that  reason  would,  perhaps,  render  it  nonnegotiable.  Such  a 
clause  would  not,  it  seems  to  me,  come  within  the  ruling  of  the 
last  case  cited  for  it  is  not  a  clause  in  its  terms  waiving  notice  of 
an  extension  simply,  but  affirmatively  agreeing  to  such  extension. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  399 

The  question  is  a  close  one.    No  one  can  say  with  certainty  just 
how  the  courts  would  decide  it. 


Note  Is  Negotiable  Though  Appearing  on  Its  Face  to  Be  a 

Renewal. 

A  note  which  a  bank  took  in  the  regular  course  of  business  before  ma- 
turity, discounting  the  same  for  value,  matures,  and  the  bank  is  offered  a 
new  note  with  the  word  "renewal"  written  on  it.  Would  the  bank  be 
considered  a  bona  fide  holder  of  this  new  note,  or  would  the  fact  that  the 
word  "renewal"  is  written  in  it  charge  the  bank  with  notice  of  any  de- 
fenses ? 

It  is  well  settled  that  "where  a  negotiable  instrument  is  trans- 
ferred before  its  maturity  in  payment  of  a  preexisting  debt,  the 
transferee  is  a  holder  for  value  and  takes  the  paper  free  from 
the  equities  existing  between  the  original  parties."  Harrell  v. 
National  Bank  of  Commerce,  128  Ga.  504. 

This  being  true,  the  bank  would  occupy  the  position  of  a  bona 
fide  holder  in  taking  the  renewal  note  under  the  circumstances 
mentioned.  The  fact  that  the  note  shows  on  its  face  that  it  was 
a  renewal  would  not  prevent  it  from  being  a  negotiable  paper  or 
charge  the  holder  with  notice  of  any  defenses.  It  has  been  fre- 
quently held  in  cases  where  a  note  showed  on  its  face  what  the 
consideration  was,  that  this  did  not  prevent  it  from  being  a  ne- 
'gotiable  instrument  or  render  it  subject  to  equities.  So  words  on 
a  note  indicating  that  it  is  a  mortgage  note  or  a  purchase-money 
note,  or  other  words  of  like  character,  have  been  frequently  held 
not  to  affect  the  negotiability  of  the  paper  or  to  put  the  holder 
on  notice  of  equities  existing  between  the  original  parties. 


Bill  of  Exchange  or  Draft  Payable  "With  Exchange"  Is 
Negotiable. 

Is  a  bill  of  exchange  or  a  promissory  note  payable  in  exchange  or  with 
exchange  negotiable  under  the  law  of  Georgia,  or  is  it  nonnegotiable  be- 
cause the  amount  is  not  definitely  fixed? 

I  do  not  think  the  question  has  ever  been  decided  by  the  Su- 
preme Court  or  Court  of  Appeals  of  Georgia.  The  courts  in 
other  States  are  in  hopeless  conflict,  though  I  am  inclined  to  think 
that  the  majority  of  them,  and  most  of  the  leading  text  writers 
on  the  subject  of  commercial  paper,  hold  such  a  bill  of  exchange 


400  PARK'S  BANKING  LAW  OF  GEORGIA. 

to  be  negotiable.     The  Uniform   Negotiable   Instruments  Act, 
which  has  been  adopted  in  most  of  the  States,  provides : 

"The  sum  payable  is  a  sum  certain  within  the  meaning  of  this 
act,  although  it  is  to  be  paid  *  *  *  (4)  with  exchange, 
whether  at  a  fixed  rate  or  at  the  current  rate."  (Section  21.) 

While  the  question  seems  not  to  have  been  decided  in  Georgia, 
I  think  such  bills  are  regarded  in  this  State  as  negotiable,  and  I 
believe  our  courts  would  so  hold. 

It  is  very  unusual  to  make  a  promissory  note  payable  with  ex- 
change. In  fact,  I  do  not  think  I  ever  heard  of  one  so  payable. 
Notes  are  usually  made  payable  at  a  particular  place,  and  there 
is  no  occasion  for  the  collection  of  exchange  on  them,  as  there 
is  in  the  case  of  bills  of  exchange  or  drafts.  The  question 
whether  a  note  made  payable  with  exchange  is  negotiable  has  not 
been  decided  in  Georgia.  I  do  not  think  this  would  affect  its  ne- 
gotiability. The  fact  that  a  note  bears  collection  charges,  includ- 
ing ten  per  cent,  attorney's  fees,  has  been  held  by  the  Supreme 
Court  not  to  prevent  it  from  being  negotiable. 


Demand   Note   Being   Due   Immediately   There   Can   Be   No 
Bona  Fide  Holder  Thereof. 

Is  the  holder  of  a  note,  payable  on  demand,  a  bona  fide  holder  where 
he  has  received  the  note  by  indorsement  six  months  after  it  was  exe- 
cuted ? 

Section  4292  of  Park's  Ann.  Code  provides  that  notes  payable 
on  demand  are  due  immediately.  Section  4286  of  the  Code  pro- 
vides that  a  bona  fide  holder  for  value  of  a  note,  who  receives  it 
before  it  is  due  and  without  notice  of  any  defect  or  defense,  shall 
be  protected  from  defenses  set  up  by  the  maker.  Section  4287 
of  the  Code  says  that  if  the  holder  receives  the  note  after  it  is 
due, -its  nonpayment  at  maturity  is  notice  to  him  of  dishonor.  As 
a  note,  payable  on  demand,  is  due  immediately,  one  who  receives 
such  note  after  its  date  can  not  be  a  bona  fide  holder,  because  he 
takes  it  after  it  is  due. 


OPINIONS  of  THE  GENERAL  COUNSEL.  401 

Purchase-Money     Notes     of     Land     Are     Good     Collateral, 
Especially  Where  Indorsee  Also  Holds  Title  to  the  Land. 

1.  Are  purchase-money  notes  for  land  where  bond   for  title  is  given, 
good  collateral? 

2.  Where  such  notes  are  discounted  at  a  bank  and  are  paid,  to  whom 
does  the  maker  look  for  a  deed? 

1.  Purchase-money  notes  for  land  are  usually  considered  good 
collateral,  and  are  frequently  discounted.     It  should  be  borne  in 
mind,  however,  that  if  such  notes  are  transferred  without  re- 
course and  there  is  no  deed  from  the  seller  to  the  bank,  or  where 
the  notes  are  payable  to  bearer,  and  they  are  transferred  without 
indorsement  and  no  deed  made,  the  transfer  of  the  notes  of  itself 
conveys  the  title  from  the  seller  to  the  purchaser,  and  the  bank 
could  only  look  to  the  responsibility  of  the  purchaser  on  the  note, 
and  would  have  no  claim  on  the  land.     Where  the  notes  are 
regularly  indorsed  to  the  bank,  especially  where  a  deed  is  made 
from  the  seller  to  the  bank,  subject  to  the  bond  for  title,  or  a  con- 
tract to  convey  is  made,  the  bank  would  hold  as  security  for  the 
notes  the  reserved  title  of  the  seller,  and  could  subject  the  land  to 
the  payment  of  the  notes.    The  proper  way  to  handle  these  notes 
is  to  have  them  indorsed  to  the  bank,  and  have  the  seller  make  a 
deed  to  the  bank  subject  to  the  outstanding  bond  for  title.    Where 
this  is  done  the  purchase-money  note  is  first-class  security,  sup- 
posing, of  course,  that  the  land  is  worth  more  than  the  amount  of 
the  note. 

2.  When  purchase-money  notes,  which  have  been  discounted, 
are  paid,  the  purchaser  would  look  to  the  bank  for  a  deed,  pro- 
vided the  seller  had  deeded  the  property  to  the  bank,  subject  to 
the  bond.    Where  the  notes  were  transferred  and  no  deed  made 
to  the  bank,  he  would  have  to  look  to  the  seller.    The  payment  of 
the  notes  would  give  him  a  perfect  equity  in  the  land,  and  he 
could  compel  the  holder  of  the  legal  title  to  convey,  whether  this 
happened  to  be  the  bank  or  the  original  seller,  and  as  stated  above, 
if  the  note  is  tranferred  without  recourse,  or  is  payable  to  bearer 
and  is  transferred  by  delivery,  the  transfer  itself  would  operate 
to  vest  the  title  in  the  purchaser. 


Maker  of  Note  Payable  at  Named  Bank  Liable  Thereon 
Though  Not  Presented  at  That  Bank. 

A  bank  discounts  for  a  customer  a  note  payable  at  a  named  bank  in 

another  city.     The  note  is  sent  to  the  first  bank's  correspondent  in  thai 

city,  the  correspondent  not  being  the  bank  at  which  the  note  is  payable. 

The  maker  goes  to  the  bank  at  which  the  note  is  payable  on  the  day  it 

26 


402  PARK'S  BANKING  LAW  of  GEORGIA. 

matures  and  asks  for  it  but  is  told  it  is  not  there.  The  note  is  subse- 
quently presented  at  the  maker's  office  by  the  correspondent  of  the  first 
bank  and  he  refuses  payment  on  the  ground  that  the  note  is  payable  at 
the  other  bank.  Can  the  bank  presenting  the  note  protest  it?  Can  the 
maker  compel  the  holder  of  the  note  to  send  it  for  collection  to  the  bank 
at  which  it  is  payable? 

In  so  far  as  the  maker  of  the  note  is  concerned,  the  question 
is  answered  in  an  early  decision  of  the  Supreme  Court,  where  it 
was  held  that  a  demand  is  not  necessary  to  charge  the  maker  of  a 
note  payable  on  demand  at  a  particular  place.  The  court  further 
held,  however,  that  the  defendant  could  plead  readiness  to  pay 
at  the  place  stipulated,  or  damages  sustained  by  himself  in  conse- 
quence of  the  neglect  or  omission  to  make  the  demand,  and  that 
upon  proof  of  his  plea  the  plaintiff  'could  not  recover  costs  and 
damages,  and  that  the  defendant  would  be  exonerated  to  the  ex- 
tent of  the  damages  which  he  had  sustained.  Dougherty  v.  The 
Western  Bank  of  Ga.,  13  Ga.  288. 

The  maker  of  the  note  in  question  would  be  liable  and  could  be 
forced  to  pay  by  suit  without  any  presentation  of  the  note  or  de- 
mand for  payment,  either  at  the  bank  where  it  was  payable  or 
elsewhere. 

As  to  indorsers,  however,  the  rule  is  different.  Where  the 
place  of  payment  designated  in  a  note  is  a  particular  bank,  pre- 
sentment and  demand  at  the  bank  are  necessary  in  order  to  charge 
an  indorser.  The  correspondent  bank,  therefore,  could  not  pro- 
test the  note  without  presenting  it  at  the  place  designated  therein. 


Where  Check  Given  in  Payment  of  Note  Is  Not  Paid,  Surety 
Is  Not  Released  Though  Note  Marked  Paid  and  Delivered 
to  Maker. 

Are  sureties  or  indorsers  relieved  when  the  note  upon  which  they  are 
secondarily  liable  is  paid  by  check  of  the  maker,  the  note  being  marked 
paid  and  delivered  to  the  maker? 

It  is  well  settled  that  a  check  or  draft  is  not  payment  until  it 
is  itself  paid,  unless  it  can  be  shown  that  it  was  the  intention  of 
the  parties  that  it  should  be  so  treated.  The  marking  of  the  note 
paid  and  delivering  it  to  the  maker  would  not  alone  be  sufficient 
to  take  the  transaction  out  of  the  general  rule.  This  has  been 
expressly  held  by  the  Supreme  Court  in  the  case  of  Kinard  v. 
First  National  Bank  of  Sylvester,  125  Ga.  228.  In  this  case  a 
note  was  marked  paid  and  the  mortgage  securing  it  cancelled, 
and  the  note  and  mortgage  were  delivered  to  the  maker.  But  in 


OPINIONS  OF  THE  GENERAL  COUNSEL.  403 

spite  of  this  the  bank  was  allowed  to  foreclose  its  mortgage.  The 
fact  that  other  parties  are  also  liable  on  the  note  would  not  change 
the  rule.  Of  course,  the  bank  would  be  under  obligation  to  these 
parties  to  use  reasonable  diligence  in  the  collection  of  the  check, 
but  only  the  same  diligence  would  be  required  in  this  case  as 
would  be  required  in  the  ordinary  case  of  collection  of  a  check. 


Bank  Can  Collect  Note  Given  in  Payment  of  Its  Stock. 

A  subscriber  for  stock  in  a  bank  borrows  money  from  another  bank 
with  which  to  pay  for  his  stock,  giving  his  note  therefor.  The  bank  issu- 
ing the  stock  subsequently  bought  the  note  and  renewed  it.  Can  that  bank 
enforce  payment  of  the  note? 

The  bank  can  enforce  payment  of  the  note,  regardless  of  the 
fact  that  the  original  indebtedness  was  created  for  the  purchase 
of  its  stock.  The  note  was  not  given  to  the  bank  which  issued 
the  stock,  and  there  was  no  agreement  or  understanding  that  that 
bank  should  take  it  over.  But  even  if  there  had  been,  this  would 
not  be  a  defense  so  far  as  the  debtor  is  concerned.  He  owes  the 
debt,  and  the  bank  ought  to  be  able  to  enforce  payment.  The 
fact  that  the  note  was  originally  given  for  money  used  to  pur- 
chase stock  in  the  bank  would  not  be  a  defense  to  the  note. 


Judgment  Notes  Are  Unknown  in  Georgia. 

Can  the  maker  of  a  note  in  Georgia  in  the  body  of  the  note  authorize 
an  attorney  in  fact  to  confess  judgment  for  him  on  the  note  if  not  paid 
at  maturity? 

Judgment  notes,  as  they  are  usually  called,  that  is,  notes  "em- 
bodying an  authorization  to  any  attorney  or  to  a  designated  at- 
torney, or  to  the  holder,  or  the  clerk  of  the  court,  to  enter  an  ap- 
pearance for  the  maker  and  confess  a  judgment  against  him  for 
the  sum  named  therein,  upon  default  of  payment  of  the  note," 
are  not  known  in  Georgia.  Whether  such  a  warrant  or  power 
of  attorney  would  be  valid  in  this  State  seems  not  to  have  been 
decided  .  The  text  writers  agree  that  in  the  absence  of  a  statutory 
prohibition  such  notes  are  valid.  As  we  have  no  statute  pro- 
hibiting such  notes,  it  is  probable  that  they  would  be  upheld  in 
this  State.  The  reason  doubtless  that  such  notes  have  not  been 
used  is  that  in  Georgia  judgments  must  be  rendered  at  regular 
terms  of  the  court  and  suits  must  be  filed  a  specified  number  of 


404  PARK'S  BANKING  LAW  OF  GEORGIA. 

days  before  the  convening  of  the  term.  Park's  Ann.  Code,  § 
5954.  Our  statutes  provide  that  in  the  event  of  the  failure  of  a 
defendant  to  file  his  answer,  judgment  by  default  may  be  entered 
against  him.  While  confessions  of  judgment  are  not  unknown  in 
Georgia,  there  is  very  little  reason  for  such  confessions,  as  the 
same  result  is  accomplished  by  taking  judgment  by  default.  In 
the  event  a  note  should  contain  a  power  of  attorney  authorizing 
the  confession  of  judgment  thereon,  suit  would  have  to  be  filed 
on  the  note  in  precisely  the  same  way  as  though  it  contained  no 
such  power  and  the  same  length  of  time  would  have  to  elapse  be- 
tween the  filing  of  the  suit  and  the  entry  of  judgment,  otherwise 
the  judgment  would  be  void  as  to  third  persons.  Ainsworth  v. 
Mobile,  Etc.,  Co.,  102  Ga.  123.  There  is,  therefore,  little  or 
no  advantage  in  having  such  a  power  of  attorney  to  confess 
judgment  embraced  in  the  note.  In  the  States  where  judgment 
notes  are  common,  the  statutes  usually  provide  for  a  quick  method 
of  obtaining  judgment.  In  many  of  them  the  clerk  is  authorized 
to  enter  up  judgment  and  issue  execution  immediately.  Of 
course,  where  this  practice  prevails,  a  judgment  note  is  quite  an 
advantage  over  an  ordinary  promissory  note. 


Debtor  Is  Not  Entitled  to  Interest  on  Partial  Payments  Made 
Before  Maturity,  Where  Note  Payable  at  Fixed  Date. 

A  note  is  payable  at  a  fixed  date,  and  draws  interest  from  date.  Cer- 
tain payments  are  made  on  the  note  which  are  properly  credited  on  the 
back.  At  the  time  the  payments  are  made  there  is  no  agreement,  express 
or  implied,  with  regard  to  interest.  Does  interest  stop  on  the  amounts 
credited  from  the  dates  of  payment? 

The  precise  question  has  been  decided.  In  the  case  of  Black- 
shear  Manufacturing  Company  v.  Stone,  8  Ga.  App.  661,  it  is 
said : 

"Where  a  promissory  note  is  payable  on  a  fixed  day,  and  not 
'on  or  about'  a  fixed  date,  and  the  debtor  makes  payments  before 
the  maturity  of  the  note,  he  is  not  entitled,  in  the  absence  of  an 
agreement  to  the  contrary,  to  interest  on  the  payments  from  the 
time  they  are  made  up  to  the  date  the  note  is  due." 


Place  of  Signature  of  Surety  on  Note  Immaterial. 

Is  a  person  who  signs  a  note  as  security  outside  the  border  of  the  note, 
but  on  the  face  of  it.  liable  on  the  note? 

There  is  no  doubt  that  a  party  so  signing  a  note  can  be  held 
liable.    The  question  is  settled  by  the  decision  of  the  Supreme 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  405 

Court  in  the  case  of  Quin  v.  Sterne,  26  Ga.  223,  from  which  I 
quote : 

"Where  the  signature  of  a  party  is  put,  at  the  time  it  was  made, 
upon  a  promissory  note,  payable  to  another  or  bearer,  and  held  by 
the  payee  continuously  from  the  execution  and  delivery  of  the 
note,  the  location  alone  of  the  signature  is  not  to  control  in  settling 
the  liability  of  the  parties. 

"The  signature  of  the  maker  of  a  note  is  usually  below,  at  the 
right  hand ;  it  is  not  essential,  however,  that  it  should  be  there ; 
and  it  matters  not  in  what  part  of  the  note  it  is  placed,  provided 
it  can  be  ascertained  who  the  maker  is.  And  the  same  doctrine 
applies  to  indorsers." 


OFFICERS. 


Notice  of  Resignation  of  Not  Required. 

Does  the  law  make  it  obligatory  upon  an  officer  of  a  bank,  in  the  event 
of  a  desire  to  resign,  to  give  a  certain  number  of  days'  notice  to  the 
bank,  and  if  so  how  many  days? 

An  officer  of  any  corporation  may  resign  at  any  time  without 
previous  notice  to  the  corporation,  unless  his  contract  of  em- 
ployment or  the  by-laws  of  the  corporation  restrict  him  in  doing 
so.  Of  course,  by  contract  the  right  of  an  officer  to  resign  or  the 
time  when  the  resignation  shall  take  effect  may  be  limited,  and  the 
same  effect  may  be  accomplished  by  a  by-law  provision.  In  the 
absence  of  any  provision  in  the  contract  of  employment  or  in  the 
by-laws,  an  officer  may  resign  when  he  sees  fit  and  without  any 
previous  notice  of  his  intention  to  do  so. 


Guaranty  of  Note  by  Officer  for  Compensation  Valid,  but 
Practice  Disapproved. 

Can  the  president  of  a  national  bank  guarantee  the  payment  of  a  debt 
due  the  bank  by  one  of  its  customers,  accepting  from  the  customer  com- 
pensation for  his  guarantee? 

An  officer  of  a  national  bank  is  not  forbidden  to  borrow  from 
the  bank,  either  directly  or  indirectly.  Of  course,  the  president 
would  not  be  authorized  to  make  loans  to  himself  or  to  another 
person  on  the  strength  of  his  guarantee,  but  the  board  of  directors 
or  the  committee  of  the  board  having  authority  to  make  loans 
could  lend  either  to  the  president  or  to  some  one  else  on  the 


406  PARK'S  BANKING  LAW  OF  GEORGIA. 

strength  of  the  president's  indorsement  or  guarantee.  I  do  not 
think  there  would  be  any  legal  reason  why  the  president  should 
not  be  compensated  for  the  risk  which  he  would  assume  in  guar- 
anteeing a  paper  of  a  customer. 

Of  course,  the  president  could  not  make  a  profit  at  the  expense 
of  the  bank  or  be  personally  compensated  for  lending  the  funds 
of  the  bank,  but  if  the  payment  is  made  not  for  securing  the  loan, 
but  as  compensation  for  the  risk  assumed,  and  if  the  loan  is  made 
by  the  board  of  directors  or  a  duly  authorized  committee,  and  not 
by  the  president,  I  think  the  transaction  would  be  legal  in  spite 
of  the  fact  that  the  president  received  compensation  for  his  guar- 
antee. Such  a  transaction,  while  legal,  is  of  very  doubtful  pro- 
priety, however.  It  is  very  easy  to  see  how  it  might  be  abused 
by  the  president's  refusing  to  approve  loans  to  a  customer  unless 
he  was, paid  something  for  guaranteeing  it.  There  is  also  danger, 
where  the  president  is  himself  liable,  of  the  bank's  interest  suffer- 
ing because  the  paper  is  not  pushed  sufficiently. 

I  thoroughly  disapprove  of  any  transaction  where  an  officer  of 
the  bank  assumes  a  position  which  may  be  antagonistic  to  the 
bank  or  out  of  which  he  gets,  even  legitimately,  any  personal 
benefit.  Where  the  transaction  is  explained  to,  and  approved 
by,  the  directors,  the  president,  of  course,  would  be  bound  on  his 
guarantee,  and  the  original  debtor  would  also  be  bound,  and  the 
bank  would  seem  to  have  no  concern  as  to  what  was  paid  to  the 
president  personally  for  assuming  the  obligation ;  but  I  think  it 
would  be  very  much  better  to  handle  the  transaction  in  some 
other  way  and  to  avoid  the  appearance  of  evil  and  the  temptation 
which  such  irregular  transactions  almost  inevitably  produce. 

NOTE. — Section  209  of  the  Banking  Act  of  1919  makes  it  a  misdemeanor 
for  an  officer,  to  accept  compensation  for  making  a  loan. 


Officers  Are   Liable  for  Allowing  Overdrafts  Unless 
Authorized  by  Board  of  Directors. 

What  is  the  liability  of  officers  of  banks  who  allow  overdrafts? 

One  of  the  earliest  cases  on  the  subject  is  Minor  v.  Bank,  re- 
ported in  1  Peters  (U.  S.)  46.  That  was  a  suit  on  a  cashier's 
bond,  in  which  it  was  claimed  that  he  was  liable  for  having  al- 
lowed ovedrafts.  He  sought  to  justify  on  the  ground  that  the 
usage  and  practice  of  the  bank  excused  him.  Said  Mr.  Justice 
Story: 


OPINIONS  of  THE  GENERAL  COUNSEL.  407 

"What  is  that  usage  and  practice,  as  put  in  the  case?  It  is  a 
usage  to  allow  customers  to  overdraw,  and  to  have  their  checks 
and  notes  charged  up  without  present  funds  in  the  bank;  stripped 
of  all  technical  disguise,  the  usage  and  practice  thus  attempted 
to  be  sanctioned,  is  a  usage  and  practice  to  misapply  the  funds  of 
the  bank,  and  to  connive  at  the  withdrawal  of  the  same,  without 
any  security,  in  favor  of  certain  privileged  persons.  Such  a  usage 
and  practice  is  surely  a  manifest  departure  from  the  duty,  both 
of  the  directors  and  the  cashier,  as  cannot  receive  any  counte- 
nance in  a  court  of  justice.  It  could  not  be  supported  by  any  vote 
of  the  directors,  however  formal ;  and,  therefore,  whenever  done 
by  the  cashier,  is  at  his  own  peril,  and  upon  the  responsibility 
of  himself  and  his  sureties.  It  is  anything  but  'well  and  truly  exe- 
cuting his  duties,  as  cashier.'  " 

This  is,  however  perhaps  an  overstatement  under  present  con- 
ditions, even  if  the  Supreme  Court  of  the  United  States  is  the 
authority  quoted. 

The  commonly  accepted  rule  is  somewhat  fully  stated  in  the 
1917  Edition  of  Morse  on  Banks  and  Banking,  §§  357,  358.  In 
discussing  the  nature  of  overdrafts,  the  author  says : 

"In  fact,  it  is  nothing  else  but  a  loan  and  a  loan  of  a  very  dan- 
gerous and  irregular  description,  wherein  the  bank  has  no  se- 
curity whatsoever  beyond  the  right  of  action  against  the  drawer. 
If  a  cashier,  not  authorized,  as  cashiers  seldom  are,  to  loan  the 
funds  of  the  bank,  or  if  the  paying  teller,  who  probably  never  has 
such  authority,  pay  the  overdraft  of  a  customer  without  specific 
power  from  the  government  of  the  bank,  but  simply  of  his  own 
individual  motion,  his  act  is,  in  the  eye  of  the  law,  a  breach  of  his 
trust.  They  have  used  the  funds  and  property  of  the  bank  in  a 
manner  which  the  law  does  not  authorize,  and  in  which  they  have 
not  even  a  color  of  right  to  use  them.  They  have  imperilled  the 
safety  of  corporate  money  by  loaning  it,  and  the  fact  that  it  is  to 
a  customer  whom  they  believe  to  be  rich  and  honest,  and  a  man 
whom  it  is  desirable  to  favor,  does  not  prevent  the  transaction 
from  being  a  transgression  beyond  the  limits  of  their  power  and 
duties.  *  *  *  The  fact  that  in  banking  business  such  things 
are  often  done,  and  that  their  true  character  is  hardly  recognized 
or  appreciated  by  the  actors  in  them,  is  perhaps  a  moral  extenua- 
tion, but  it  is  certainly  no  legal  excuse.  The.  language  of  the 
adjudicated  cases  is  not  capable  of  being  explained  away.  Such 
a  course  of  dealing,  long  carried  on  by  a  cashier  or  teller  with 
the  knowledge  and  express  or  tacit  approval  of  the  bank  directors, 
may  possibly  relieve  him  from  liability  to  them.  *  *  *  Of 
course,  however,  there  is  a  power  in  the  bank  to  allow  overdrafts. 
By  negotiating  with  the  authorized  and  proper  officials  a  customer 
may  make  a  legal  and  binding  arrangement  by  which  his  over- 
drafts to  a  certain  amount  named  and  under  the  circumstances 
agreed  upon  shall  be  honored."  1  Morse  on  Banks  and  Banking, 
§§  357,  358. 


408  PARK'S  BANKING  LAW  OF  GEORGIA. 

NoTE.— Section  160  of  the  Banking  Act  of  1919,  enacted  since  this 
opinion  was  written,  provides :  "Any  officer,  or  employee,  of  any  bank 
who  shall  permit  any  customer  of  the  bank  to  overdraw  his  account  or 
who  shall  pay  any  check  or  draft,  the  paying  of  which  shall  overdraw 
any  account,  unless  the  same  shall  be  authorized  by  the  board  of  directors 
or  by  a  committee  of  such  board  authorized  to  act,  shall  be  personally  and 
individually  liable  to  such  bank  for  the  amount  of  such  overdraft? 


PARTNERSHIP. 


Notice  of  Dissolution  Necessary  to  Relieve  Partner  from  Sub- 
sequent Acts  in  Partnership  Name. 

After  the  dissolution  of  a  partnership,  the  partner  who  managed  the 
business  gives  a  note  in  the  firm  name  for  money  borrowed,  representing 
that  the  firm  is  still  in  business.  Is  the  other  partner  bound? 

Upon  the  dissolution  of  a  partnership,  notice  of  the  dissolu- 
tion should  be  given  to  the  public  by  published  advertisement ;  in 
addition  to  this,  all  persons  with  whom  the  firm  does  business 
should  be  notified  personally  of  the  dissolution.  If  no  such 
notice  is  given,  a  person  who  has  previously  dealt  with  the  firm 
and  who  has  no  knowledge  of  the  dissolution  or  notice  of  suf- 
ficient facts  to  put  him  upon  inquiry,  can  hold  all  members  of  the 
firm  for  an  indebtedness  incurred  after  dissolution,  in  the  firm 
name,  and  in  the  regular  way  in  which  the  firm  has  been  accus- 
tomed to  do  business.  Park's  Ann.  Code,  §  3163. 


PASS  BOOK. 

Entries  in  Pass  Book  Not  Conclusive  Against  the  Bank. 

Does  an  entry  erroneously  made  in  a  depositor's  pass  book  prove  con- 
clusively a  liability  against  the  bank? 

A  credit  entry  in  a  pass  book  is  the  bank's  receipt  for  money 
deposited.  No  receipt  is  conclusive,  but  can  always  be  shown  to 
be  erroneous,  if,  in  fact,  it  is  erroneous. 

The  Supreme  Court  of  Georgia  has  answered  the  question  in 
the  case  of  Bank  of  Lawrenceville  v.  Rockmore,  129  Ga.  582,  in 
which  the  court  says : 

"A  bank  pass  book  is  evidence,  but  not  conclusive  evidence,  of 
the  amount  due  to  a  depositor." 


OPINIONS  OF  THE  GENERAL  COUNSEL.  409 

Money  Erroneously  Credited  to  a  Depositor  and  Checked  Out 
May  Be  Recovered  Although  Pass  Book  and  Checks 
Destroyed. 

A  depositor  checks  out  his  entire  balance.  He  then  destroys  all 
his  old  checks,  pass  books,  deposit  tickets,  etc.  Some  two  months 
after  the  account  is  closed  the  bank  discovers  that  through  an  error  he 
has  been  credited  with  $200.00  that  should  have  gone  to  another  account. 
Can  the  bank  recover  the  amount? 

The  entry  of  this  deposit  was  a  mistake.  The  depositor  was 
given  credit  for  an  amount  to  which  he  was  not  entitled.  When 
he  checked  out  his  balance,  including  this  sum,  he  received  $200 
of  the  bank's  money.  I  know  of  no  reason  why  he  should  not  be 
required  to  account  to  the  bank  for  this  money  erroneously  paid 
to  him.  The  fact  that  it  was  entered  presumably  in  his  pass  book 
does  not,  it  would  seem,  change  the  rule.  Some  of  the  earlier 
cases  held  that  the  entry  in  a  pass  book  was  conclusive  against 
the  bank,  but  this  rule  has  been  changed  by  the  later  decisions. 
I  quote  from  Bolles  on  the  Modern  Law  of  Banking : 

"Formerly  entries  in  a  pass  book  were  regarded  in  a  more 
technical  manner  than  they  are  to-day.  Once,  an  entry  made  by 
a  bank  officer  at  the  time  of  receiving  a  deposit  was  deemed 
original  and  binding  on  the  bank,  but  not  on  the  depositor;  and 
on  neither  when  the  entry  was  made  afterward  by  copying  from 
the  ledger.  The  modern  law  has  swept  away  all  this  refining. 
The  rights  of  neither  party  are  absolutely  fixed  by  the  entries,  and 
they  are  always  'open  to  examination  and  correction.'  Prima 
facie  they  are  correct,  but  not  conclusive."  Bolles  on  The  Mod- 
ern Law  of  Banking,  p.  467. 

This  is  the  rule  in  Georgia.  See  Bank  v.  Rockmore,  129  Ga. 
582,  quoted  in  the  preceding  opinion. 

In  a  somewhat  similar  case  in  which  the  error  had  been  in  the 
bank's  favor  instead  of  against  it,  the  Supreme  Court  of  the 
United  States  used  this  language : 

"It  comes  to  this,  then,  that  upon  a  settlement  of  accounts  be- 
tween them,  a  credit  was  by  mistake  allowed  to  the  bank  to  which, 
it  was  not  entitled.  The  law  is,  that  neither  party  is  to  be  bene- 
fited or  to  be  injured  by  the  mistake.  The  bank  must  refund  the 
amount  by  handing  over  the  sum,  or  by  crediting  the  same  to  Mr. 
Spinner  in  his  next  account.  Mistakes  in  bank  accounts  are  not 
uncommon.  They  occur  both  by  unauthorized  or  pretended  pay- 
ments, as  well  as  by  the  omission  to  give  credit  for  sums  de- 
posited. When  discovered,  the  mistake  must  be  rectified,  and  an 
ordinary  writing  up  of  a  bank  book,  with  a  return  of  vouchers 
or  a  statement  of  accounts,  precludes  no  one  from  ascertaining 
the  truth  and  claiming  its  benefit."  First  National  Bank  v.  Whit- 
man, 94  U.  S.  343,  24  L.  Ed.  229. 


410  PARK'S  BANKING  LAW  OF  GEORGIA. 

The  destruction  of  the  pass  book,  cancelled  checks,  etc.,  does 
not  affect  the  question  at  all.  It  may  make  it  much  more  difficult 
for  the  mistake  to  be  established,  but  if  it  is  clearly  shown  the 
destruction  of  the  evidence  could  not  affect  the  question  of  lia- 
bility. 


Furnishing  Statement  of  Account  Is  Equivalent  to  Balancing 

Pass  Book. 

Has  a  monthly  statement  of  a  depositor's  account  returned  with  his 
cancelled  checks  the  same  effect  as  entering  the  checks  and  striking  the 
balance  in  the  pass  book  as  is  usually  done? 

The  effect  of  balancing  a  customer's  pass  book  and  returning 
his  checks  is  simply  stating  the  account  between  the  bank  and  the 
customer.  Furnishing  a  statement  of  the  account,  with  accom- 
panying vouchers,  has  precisely  the  same  effect  as  balancing  the 
pass  book.  It  is  more  convenient,  as  it  can  be  regularly  done 
without  waiting  for  the  pass  book  to  be  presented.  It  is  usually 
adopted  as  between  banks,  and  many  banks  are  now  using  it  with 
their  customers. 


Printed  Rules  in  Savings  Bank  Pass  Book  Binding  on 
Depositor. 

Is  a  printed  rule  in  a  savings  pass  book  that  payments  made  to  a  person 
presenting  pass  book  shall  be  good  and  valid  on  account  of  the  owner, 
legal  and  could  it  be  enforced  in  a  case  covered  by  it? 

There  is  no  doubt  under  a  decision  of  the  Supreme  Court  that 
such  a  rule  is  reasonable  and  binding  upon  depositors.  The  Su- 
preme Court  said  in  the  case  of  Langdale  v.  Citizens  Bank  of 
Savannah,  121  Ga.  105 : 

"A  rule  providing  that  'Every  effort  will  be  made  to  protect 
depositors  against  fraud,  but  payment  made  to  a  person  present- 
ing pass  book  shall  be  good  and  valid  on  account  of  the  owner, 
unless  the  pass  book  has  been  lost  and  notice  in  writing  given  to 
(the)  bank  before  such  payment  is  made,'  is  reasonable  and 
binding  upon  depositors." 

As  to  whether  or  not  the  rule  can  be  enforced  in  a  case  to 
which  it  is  applicable,  seems  to  depend  on  whether  there  are  any 
circumstances  to  arouse  the  suspicion  of  the  bank  when  the  book 
is  presented  by  a  person  other  than  the  owner.  If  there  are  no 
such  circumstances  and  no  negligence  can  be  imputed  to  the  bank 
in  the  payment,  then  the  bank  is  not  liable  if  the  pass  book  is  pre- 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  411 

sented.    The  Supreme  Court  in  the  case  above  cited  states  the  law 
as  follows : 

"Under  the  terms  of  such  a  rule,  where  a  pass-book  is  pre- 
sented by  a  person  other  than  the  depositor  to  whom  it  belongs, 
together  with  a  forged  check  bearing  a  signature  similar  to  that 
of  the  depositor,  and  there  is  nothing  to  arouse  the  suspicion  of 
the  teller  or  put  him  upon  inquiry,  as  a  reasonably  prudent  man, 
as  to  the  genuineness  of  the  check,  and  the  bank  in  good  faith 
pays  the  check,  believing  the  person  presenting  it  to  be  the  de- 
positor, it  is  not  liable  in  a  suit  by  the  depositor  to  recover  the 
money  so  paid." 

The  principle  of  this  case  has  been  recently  reaffirmed  by  the 
Court  of  Appeals  of  Georgia  in  the  case  of  Wilson  v.  The  Citizens 
&  Southern  Bank,  23  Ga.  App.  654,  99  S.  E.  239. 


POST-CARD  NOTICES. 


A  Notice  of  Maturity  on  a  Post-Card  Is  Not  Nonmailable. 

Is  a  postal  card  notice  that  a  bank  holds  a  note  or  draft  on  the  party 
addressed,  giving  the  date  when  the  paper  is  due  and  stating  that  it  will 
be  held  until  a  certain  date,  in  violation  of  the  Act  of  Congress  making 
certain  matter  nonmailable? 

The  Act  of  Congress  declares  nonmailable  any  postal  card 
upon  which  are 

"Any  delineations,  epithets,  terms,  or  language  of  an  indecent, 
lewd,  lascivious,  obscene,  libelous,  scurrilous,  defamatory,  or 
threatening  character,  or  calculated  by  the  terms,  or  manner,  or 
style  of  display,  and  obviously  intended,  to  reflect  injuriously 
upon  the  character  or  conduct  of  another."  (Italics  mine.)  U. 
S.  Penal  Code,  §  212. 

A  mere  notice  that  a  bank  holds  for  collection  a  paper,  unac- 
companied by  any  threat  and  with  no  language  of  any  sort  which 
could  possibly  reflect  on  the  person  addressed  is  not  nonmailable. 


POWER  OF  SALE. 


In  Collateral  Note  Not  Revoked  by  Death  of  Maker. 

Does  the  death  of  the  maker  of  a  note  secured  by  collateral  revoke  a 
power  of  sale  contained  in  the  note? 

In  1894  the  legislature  passed  an  act  providing  that  where  a 
creditor  advances  money  upon  the  pledge  of  a  certificate  of  stock 


412  PARK'S  BANKING  LAW  OF  GEORGIA. 

or  other  script  representing  an  ownership  or  interest  in  a  corpora- 
tion in  Georgia,  he  shall  have  an  irrevocable  interest  in  such 
certificate,  which  is  not  affected  by  the  death  or  disability  of  the 
person  in  whose  name  the  stock  stands  on  the  books  of  the  com- 
pany, and  the  same  rights  after  the  death  of  the  pledger  as  before. 
Park's  Ann.  Code,  §  3575. 

The  same  section  provides  that,  while  an  agency  is  generally 
revocable  at  the  will  of  the  principal  and  that  death  revokes  a 
power,  if  the  power  is  coupled  with  an  interest  in  the  agent  him- 
self, it  is  not  revocable. 

A  bank  holding  collateral  with  a  power  of  sale,  in  the  event 
the  debt  is  not  paid,  would  have  such  an  interest  as  would  make 
the  power  irrevocable.  This  is  true  in  the  case  of  a  power  of 
sale  in  a  security  deed.  See  Roland  v.  Coleman,  76  Ga.  652; 
Baggett  v.  Edwards,  126  Ga.  463. 

The  situations  of  the  grantee  in  a  deed  to  secure  debt  and  the 
holder  of  a  note  secured  by  collateral  are  very  similar.  Section 
3532  of  Park's  Ann.  Code  provides  that  the  general  property  of 
goods  pawned  remains  in  the  pawner,  but  the  pawnee  has  a  spe- 
cial property  therein,  and  that  the  death  of  neither  party  inter- 
feres with  their  respective  interests.  As  the  pawnee  has  an  in- 
terest which  is  not  affected  by  the  death  of  the  pawner,  and  has 
by  the  terms  of  the  instrument  creating  the  pledge  a  power,  he 
would  have  a  power  coupled  with  an  interest,  which  under  § 
3575  would  not  be  revoked  by  the  death  of  the  pledger. 


PROTEST. 

County  Warrants   Not  Protestable.     General   Discussion  of 
Protest  and  What  Papers  Are  Protestable. 

Is  a  county  warrant,  that  is,  a  warrant  drawn  by  the  chairman  of  the 
county  commissioners  on  the  county  treasurer,  subject  to  protest  ? 

I  do  not  think  so.  A  county  warrant  is  a  voucher  for  the 
treasurer  rather  than  a  negotiable  instrument.  Quoting  from 
Daniel  on  Negotiable  Instruments,  §  427 : 

"Frequently  a  draft,  order,  or  warrant  is  drawn  by  one  officer 
of  a  municipal  corporation  upon  another;  or  by  the  selectmen 
of  a  town,  or  supervisors  of  a  county,  upon  an  officer,  for  the 
payment  of  corporate  indebtedness  to  the  payee.  The  intention 
in  such  case  is,  as  a  general  rule,  to  furnish  vouchers  to  the  proper 


OPINIONS  of  THE  GENERAL  COUNSEL.  413 

disbursing  officer,  and  not  to  put  negotiable  instruments  in  cir- 
culation. And  it  has  been  generally,  and  as  we  think  justly, 
considered  that  such  drafts,  orders,  or  warrants  are  not  negotia- 
ble instruments,  and  cannot  be  regarded  either  as  bills  of  ex- 
change or  promissory  notes,  cutting  out  equities  as  against  the 
corporation — on  the  ground  that  there  is  no  implied  authority  in 
such  officers  to  execute  negotiable  instruments." 

The  author  cites  a  large  number  of  cases  in  support  of  the  text, 
among  them  a  case  from  the  Supreme  Court  of  the  United  States, 
where  it  was  said  with  reference  to  county  warrants : 

"The  warrants  being  in  form  negotiable  are  transferable  by 
delivery,  so  far  as  to  authorize  the  holder  to  demand  payment  of 
them,  and  to  maintain,  in  his  own  name,  an  action  upon  them. 
But  they  are  not  negotiable  instruments  in  the  sense  of  the  law 
merchant,  so  that  when  held  by  bona  fide  purchasers,  evidence 
of  their  invalidity  or  defenses  available  against  the  original  payee 
would  be  excluded.  The  transferee  takes  them  subject  to  all 
legal  and  equitable  defenses  which  existed  to  them  in  the  hands 
of  such  payee."  Wall  v.  County  of  Monroe,  103  U.  S.  77,  26  L. 
Ed.  430. 

A  good  deal  of  confusion  seems  to  exist  in  the  minds  of  bankers 
as  to  what  papers  are  protestable  under  our  Georgia  statute. 
Under  the  law  merchant,  drawers  and  indorsers  of  both  inland 
and  foreign  bills  of  exchange  were  entitled  to  notice  of  dishonor. 
Protest  was  permissible  on  inland  bills  and  required  on  foreign 
bills.  Afterwards  it  became  customary  to  give  notice  of  dishonor 
and  to  protest  promissory  notes.  In  1826  the  practices  originat- 
ing under  the  law  merchant  were  abolished  by  statute  in  this 
State  as  to  all  instruments  except  promissory  notes  given  for  the 
purpose  of  negotiation  or  intended  to  be  negotiated  or  left  for 
collection  at  a  chartered  bank.  Act  of  1826,  Cobb's  Digest  594. 

The  Code  of  1863  modified  the  statute  to  some  extent,  the  rule 
there  established  being: 

"When  bifls  of  exchange  and  promissory  notes  are  made  for 
the  purpose  of  negotiation,  or  intended  to  be  negotiated  at  any 
chartered  bank,  and  the  same  are  not  paid  at  maturity,  notice  of 
the  nonpayment  thereof,  and  of  the  protest  of  the  same  for  non- 
payment, or  nonacceptance,  must  be  given  to  the  indorsers 
thereon  within  a  reasonable  time,  either  personally  or  by  post, 
(if  the  residence  of  the  indorser  be  known,)  or  the  indorser  will 
not  be  held  liable  thereon ;  but  in  no  other  case,  and  upon  no 
other  bills  or  notes,  shall  notice  or  protest  be  held  necessary  to 
charge  the  indorser."  Code  of  1863,  §  2731. 

The  law  stood  thus  until  1876,  when  the  section  was  amended 
by  adding  the  following : 


414  PARK'S  BANKING  LAW  OF  GEORGIA. 

"That  it  shall  not  be  necessary  to  protest  as  now  required  by 
law  in  order  to  bind  indorsers  except  in  the  following  cases,  to 
wit,  1st,  when  a  paper  is  made  payable  on  its  face  at  a  bank  or 
banker's  office;  2d,  when  it  is  discounted  at  a  bank  or  banker's 
office;  3d,  when  it  is  left  at  a  bank  or  banker's  office  for  collec- 
tion— and  in  all  such  cases  days  of  grace  shall  be  allowed."  Ga. 
Laws  1876,  p.  18,  §  4. 

This  is  the  law  as  now  contained  in  the  Code  (Park's  Ann. 
Code,  §  4280),  except  that  "days  of  grace"  have  been  abolished. 

It  will  readily  be  seen,  therefore,  that  the  law  only  provides  for 
protest  in  case  of  bills  of  exchange  and  promissory  notes  which 
are  made  "for  the  purpose  of  negotiation  or  intended  to  be  ne- 
gotiated at  any  chartered  bank,"  and  that  even  in  the  case  of  these 
instruments  protest  is  not  required  unless  the  paper  is  payable  on 
its  face  at  a  bank  or  banker's  office  or  when  it  is  discounted  at  a 
bank  or  banker's  office  or  when  it  is  left  at  a  bank  or  banker's 
office  for  collection.  In  other  words,  the  paper  must  have  been 
made  for  the  purpose  of  being  negotiated  at  a  bank  and  must  have 
been  actually  so  negotiated  or  left  for  collection.  Banks  generally 
are  under  the  impression  that  any  paper  which  is  discounted  at  a 
bank  or  left  at  a  bank  for  collection  is  protestable,  but  as  will  be 
seen  this  is  not  the  case  unless  the  paper  was  intended  to  be  ne- 
gotiated at  a  bank. 

The  Supreme  Court  has  in  a  number  of  cases  held  that  the 
indorsers  and  drawers  of  domestic  bills  of  exchange,  as  well  as 
the  makers  and  indorsers  of  notes,  are  not  entitled  to  protest  and 
notice  where  the  papers  were  not  made  payable  at  a  bank  or  made 
for  the  purpose  of  negotiation  or  intended  to  be  negotiated  at  a 
chartered  bank.  I  quote  from  one  or  two  of  these  cases. 

"In  a  suit  against  the  drawers  of  a  domestic  bill  of  exchange, 
not  made  for  the  purpose  of  negotiation,  nor  intended  to  be  ne- 
gotiated, at  any  chartered  bank,  it  is  unnecessary  to  show  pro- 
test for  nonpayment,  and  notice  thereof."  Pannell  v.  Phillips, 
55  Ga.  618. 

In  discussing  this  case  it  was  said: 

"These  two  drafts  were  domestic  inland  bills  of  exchange, 
drawn  in  this  State  upon  parties  in  this  State,  and  payable  here, 
and  were  not  payable  at  any  chartered  bank,  and  were  not  made 
for  the  purpose  of  negotiation  nor  intended  to  be  negotiated,  as 
appears  on  the  face  thereof,  at  any  chartered  bank.  Since  the 
passage  of  the  Act  of  1826,  Code,  §  2781,  notice  of  the  nonaccept- 
ance  or  of  the  nonpayment  of  this  class  of  paper,  has  not  been 
required  in  this  State  to  charge  the  indorser  or  drawer."  Pannell 
v.  Phillips,  55  Ga.  619. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  415 

"Notice  that  the  acceptor  has  failed  to  pay  is  not  necessary  to 
charge  the  drawer  of  a  domestic  bill  of  exchange  in  this  State, 
the  draft  or  bill  not  being  intended  to  be  negotiated  at  any  char- 
tered bank."  High  v.  Cox,  55  Ga.  662. 

"Where  there  is  nothing  upon  the  face  of  a  bill  of  exchange  to 
show  that  it  was  intended  for  negotiation  at  a  chartered  bank, 
the  defendant — the  drawer — cannot  show  by  parol  evidence  that 
such  was  the  intention  in  a  suit  against  him  by  the  holder."  Mc- 
Laren v.  Marine  Bank,  52  Ga.  131. 

In  this  case  the  paper  was  actually  held  by  a  bank. 

"Where  a  draft  was  not  negotiable  or  payable  at  any  char- 
tered bank,  notice  of  nonpayment  was  not  necessary  to  charge  the 
drawers' or  indorsers  thereof."  Williams  v.  Lewis,  69  Ga.  825. 

The  whole  subject  is  reviewed  by  Judge  Cobb  in  Bank  of  Rich- 
land  v.  Nicholson,  120  Ga.  622,  in  which  it  is  held  that  since 
the  Act  of  1826  notice  is  only  necessary  in  the  case  of  technical 
indorsers,  and  not  even  the  drawer  of  a  domestic  bill  of  exchange, 
though  discounted  at  a  bank,  is  entitled  to  notice  of  dishonor. 

A  county  warrant  not  being  a  negotiable  instrument,  and  cer- 
tainly not  being  intended  to  be  negotiated  or  being  made  for  the 
purpose  of  negotiation  at  a  chartered  bank,  is  not  such  an  instru- 
ment as  to  require  protest. 


Protest  Is  Required  Where  Payment  of  Check  Is  Stopped. 

Where  the  drawer  of  a  check  stops  payment  on  it  should  the  check  be 
protested  ? 

A  check  is  usually  regarded  as,  substantially,  a  bill  of  ex- 
change, and  while  it  has  been  held  in  some  of  the  States  that 
protest  of  a  check  is  not  required,  most  of  the  courts  hold  that  a 
check  is  protestable.  Protest  is  not  required  to  bind  the  drawer 
of  a  check  where  he  has  no  funds  on  deposit  with  the  bank  on 
which  the  check  is  drawn,  nor  where  he  stops  payment  of  a 
check,  but  is  required  to  bind  the  indorsers.  An  indorser  is  not 
supposed  to  know  the  state  of  the  drawer's  account,  and  where 
payment  is  refused  for  lack  of  funds,  or  w;here  the  drawer  stops 
payment,  the  indorser  is  entitled  to  formal  presentment,  protest 
and  notice.  I  quote  from  Daniel  on  Negotiable  Instruments,  § 
1600: 

"While  checks  have  not  all  the  incidents  of  bills  of  exchange, 
they  may  be  yet  included  in  that  term  when  applied  to  the  steps  to 
be  taken  in  case  of  dishonor.  The  same  reasons  that  would  au- 


416  PARK'S  BANKING  LAW  OF  GEORGIA. 

thorize  the  protest  of  an  inland  bill  of  exchange  for  nonpayment, 
would  authorize  the  protest  of  a  check,  the  payment  of  which 
had  been  refused  on  presentment.  And,  therefore,  where  a  stat- 
ute provides  for  a  protest  of  inland  bills  and  promissory  notes 
[as  it  does  in  Georgia,  Code,  §  4280] ,  a  check  would  be  embraced 
within  the  description  of  paper  denominated  inland  bills  of  ex- 
change, and  mjight  be  protested  in  like  manner.  And  if  drawn  in 
one  State  upon  another,  a  protest  would  doubtless  be  neces- 
sary in  order  to  charge  an  indorser,  the  check  being  in  that  event 
a  species  of  foreign  bill." 

With  regard  to  the  necessity  for  presenting  a  check  for  pay- 
ment, this  author  says,  §  1596: 

"There  may,  however,  exist  sufficient  excuse,  on  the  part  of 
the  holder,  for  delay  or  failure  in  making  presentment  or  giving 
notice.  Thus  if  the  drawer  had  no  funds  in  the  bank  at  the  time 
of  drawing  the  check,  or  subsequently  withdrew  them,  he  commits 
a  fraud  upon  the  payee,  and  can  suffer  no  loss  or  damage  from 
the  holder's  delay  or  failure  in  respect  to  presentment  and  notice. 
He  is,  therefore,  liable  without  presentment  or  notice,  and  may 
be  sued  immediately.  *  *  *  The  indorser  of  a  check  stands 
upon  a  different  footing  from  that  of  the  drawer.  He  cannot  be 
presumed  to  know,  as  the  drawer  must  know,  the  state  of  the 
latter's  account  with  the  bank ;  and,  although  the  drawer  without 
funds  will  be  absolutely  bound,  the  indorser  of  his  check  will  not 
be  so  bound,  unless  it  be  affirmatively  shown  that  he  knew  the 
fact  that  there  were  no  funds  to  meet  it,  and  thus  participates  in 
the  wrong  committed  upon  the  holder." 


Certificate  of  Deposit  Not  Protestable. 

Is  a  certificate  of  deposit  payable  at  a  fixed  date  and  indorsed  by  one 
or  more  parties  subject  to  protest?  Would  failure  to  protest  release  an 
indorser? 

As  pointed  out  in  a  preceding  opinion,  protest  is  required  only 
of  bills  of  exchange  and  promissory  notes  made  for  the  purpose 
of  negotiation  or  intended  to  be  negotiated  at  a  chartered  bank. 
An  ordinary  certificate  of  deposit  would  hardly  come  under  the 
terms  of  the  statute.  It  is  not  a  bill  of  exchange,  nor  is  it  a  prom- 
issory note  in  the  ordinary  sense  of  the  term,  and  it  is  doubtful 
whether  it  could  be  said  to  be  made  for  the  purpose  of  negotia- 
tion, or  intended  to  be  negotiated,  at  a  chartered  bank.  I  do 
not  think,  therefore,  that  protest  is  required  on  such  certificates 
or  that  an  indorser  would  be  relieved  by  failure  to  protest. 


OPINIONS  OE  THE  GENERAL  COUNSEL.  417 

Papers  Are  Protestable  Regardless  of  Amount. 

Is  a  draft  for  less  than  $10  subject  to  protest? 

The  amount  of  the  paper  has  nothing  to  do  with  its  protestable 
character.  A  bank  would  be  required  to  protest  a  paper,  whether 
it  is  for  $1.00  or  for  many  thousands  of  dollars,  where  it  is  pro- 
testable  and  protest  is  not  waived  in  some  way.  It  is  quite  usual 
with  some  of  the  banks  to  instruct  their  correspondents  not  to 
protest  items  under  $10.00;  but  in  absence  of  instructions,  a  bank 
would  be  liable  in  the  event  of  failure  to  protest  a  small  paper 
just  as  it  would  be  if  the  paper  were  larger. 


Protestable    Paper    Held    as    Collateral    Security    Maturing 
Before  Principal  Obligation  Should  Be  Protested. 

Is  it  the  duty  of  a  bank  to  protest  a  note  left  with  it  as  collateral  se- 
curity, the  note  falling  due  before  the  borrower's  obligation  matures? 

Assuming  the  paper  to  be  protestable  under  the  rules  already 
discussed,  it  would  be  the  duty  of  the  bank  to  protest,  if  it  were 
necessary  to  do  so  in  order  to  bind  an  indorser.  A  bank  should 
protest  a  paper  held  as  collateral  just  as  though  it  had  been  left 
with  it  for  collection,  or  had  been  discounted  by  it. 


Check  Not  Indorsed  by  Payee  Is  Not  Protestable. 

Is  a  check  which  has  not  been  endorsed  by  the  payee,  but  has  several 
other  indorsements,  protestable? 

I  have  not  been  able  to  find  the  question  decided  directly,  but 
it  seems  on  principle  there  can  be  no  doubt  that  protest  is  not 
required.  Protest  and  notice  are  only  required  where  a  paper  has 
been  presented  for  payment  or  acceptance,  as  the  case  may  be, 
and  has  been  dishonored.  Its  purpose  is  to  furnish  a  convenient 
method  of  proving  the  fact  that  such  presentment  has  been 
made  and  that  the  paper  has  been  dishonored.  Payment  cannot 
be  demanded  of  a  check  payable  to  order  except  upon  the  in- 
dorsement of  the  payee.  The  refusal  to  pay  a  check  without  such 
indorsement  is  not  a  dishonor,  and  as  the  check  has  not  been  dis- 
honored it  cannot  properly  be  protested. 

Protest  is  made  where  a  paper  is  dishonored  and  notice  is  given 
of  such  dishonor  in  order  to  bind  persons  secondarily  liable  on 
27 


418  PARK'S  BANKING  LAW  of  GEORGIA. 

the  paper.  The  contract  of  these  parties,  the  drawer  and  in- 
dorsee, is  to  pay  provided  the  paper  upon  presentation  thereof 
to  the  person  primarily  liable  is  dishonored.  If  called  on  to 
respond  under  this  contract,  where  a  paper  payable  to  order  is 
presented  without  the  indorsement  of  the  payee,  they  could  very 
readily  respond  that  the  paper  had  not  been  dishonored  because 
its  direction  was  to  pay  to  the  order  of  a  named  person,  and  the 
order  of  this  person  (that  is,  his  indorsement)  had  not  been  se- 
cured. 

The  Court  of  Appeals  of  Alabama,  in  the  case  of  Harden  v. 
Birmingham  Trust  &  Savings  Bank,  55  Sou.  943,  said: 

"In  order  to  fix  a  liability  as  for  breach  of  duty  on  a  bank  for  a 
failure  to  pay  a  check  of  a  depositor  drawn  in  favor  of  another 
person,  it  must  appear  that  the  check  was  presented  at  the  proper 
time  and  place  and  properly  indorsed  by  the  payee ;  and  if  it  has 
been  transferred  by  the  payee  to  another,  then  it  should  be  in- 
dorsed by  such  other  person  also." 

As  proper  presentment  of  a  check  cannot  be  made  until  it  is 
indorsed,  protest,  which  is  simply  a  memorial  of  the  fact  that 
presentment  has  been  made  and  payment  refused,  is  not  required. 


Where  Check  Is  Indorsed  by  Agent  Whose  Authority  Is  Not 
Shown,  Protest  Is  Authorized. 

A  check  payable  to  W.  C.  H.  is  endorsed  W.  C.  H.  per  I.  B.  B.  It  is 
cashed  and  sent  forward  through  several  correspondent  banks,  all  of 
which  indorse  it  and  guarantee  prior  indorsements.  It  is  finally  presented 
to  the  drawee  bank,  which  bank  declines  payment  because  the  indorsement 
is  unauthorized.  The  bank  presenting  it  for  payment  has  the  check  pro- 
tested. Was  the  drawee  bank  justified  in  declining  payment  on  account 
of  the  alleged  unauthorized  indorsement?  Should  the  check  have  been 
protested  by  direction  of  the  bank  presenting  it? 

A  bank  always  has  right  to  decline  payment  until  the  person 
presenting  the  check  is  properly  identified,  and  in  case  of  in- 
dorsements to  decline  payment  unless  it  is  satisfied  of  the  genuine- 
ness of  these  indorsements.  This  is  true  because  a  bank  can  only 
pay  the  funds  of  a  depositor  to  the  person  to  whom  the  depositor 
directs  payment. 

Therefore,  the  drawee  bank  in  the  case  stated  was  within  its 
rights  when  it  declined  payment  on  the  indorsement  of  an  agent, 
the  agency  not  being  established. 

Whether  or  not  the  drawee  bank  having  declined  payment,  the 
checks  should  have  been  protested,  depends  upon  the  following 
considerations ; 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  419 

The  indorser  of  commercial  paper  guarantees  that  the  paper  is 
a  valid  obligation  in  every  respect.  He  warrants  the  genuineness 
of  all  of  the  signatures  to  the  paper,  and  in  addition  to  these 
warranties  he  also  warrants  that  the  paper  will  be  paid,  or  ac- 
cepted, as  the  case  may  be,  when  it  is  properly  presented  for  that 
purpose.  This  last  warranty,  however,  the  warranty  of  payment 
or  acceptance,  cannot  be  enforced  unless  a  demand  is  proved  and 
proper  notice  given,  and  the  way  to  establish  such  demand  and 
notice  is  by  formal  protest  by  a  notary  public.  The  indorser  is 
liable  on  his  indorsement,  so  far  as  the  implied  warranty  of 
genuineness  is  concerned  without  protest.  Where,  therefore,  the 
paper  is  not  genuine  or  where  it  has  been  transferred  on  a  forged 
indorsement,  the  indorser  may  be  sued  immediately  on  his  implied 
warranty  without  presenting  the  paper  or  protesting  it.  But  if 
the  paper  is  genuine  and  the  indorsements  are  all  genuine  and 
authorized,  in  order  to  hold  the  indorser  on  his  implied  warranty 
that  the  paper  will  be  paid  on  presentation  it  must  be  formally 
presented  and  protested. 

Applying  these  rules  to  the  facts  of  the  case  stated :  If  the  in- 
dorsement which  has  been  rejected  by  the  drawee  bank  is  in 
fact  unauthorized,  then  protest  is  not  necessary  in  order  to  bind 
the  several  banks  which,  by  their  indorsements,  have  guaranteed 
the  genuineness  and  authenticity  of  this  indorsement.  But  if,  on 
the  other  hand,  it  should  develop  that  the  indorsement  was  au- 
thorized, then  the  banks  would  not  be  liable  on  their  warranty 
of  the  genuineness  of  the  indorsement,  for  the  reason  that  the 
indorsement  being  genuine  there  has  been  no  breach  of  their  war- 
ranty. But,  the  paper  having  been  presented  to  the  drawee  bank 
and  payment  having  been  refused,  if  it  is  desired  to  hold  the  sev- 
eral indorsers  on  their  implied  warranty  that  the  check  would  be 
paid  when  presented  protest  would  be  necessary.  As  the  bank 
presenting  the  check  for  payment  would  not  care  to  take  the  risk 
of  determining  whether  or  not  the  indorsements  were  authorized, 
it  was  entitled  to  protect  itself  in  any  event  by  protesting  the 
check. 


Protest  of  a  Forged  Check  Not  Required,  but  Should  Be  Made 
as  Check  May  Be  Genuine. 

Is  it  the  duty  of  a  bank  to  protest  a  forged  check? 
An  indorser  being  liable  on  his  warranty  of  the  genuineness  of 
the  paper,  whether  it  is  formally  presented  and  protested  afid 


420  PARK'S  BANKING  LAW  OF  GEORGIA. 

notice  given  or  not,  protest  of  a  forged  check  is  not  necessary. 
But  as  the  indorser  is  not  liable  on  a  genuine  paper  unless  it  is 
protested  and  notice  is  given,  the  safe  rule,  even  when  the  bank 
is  satisfied  that  the  paper  is  a  forgery,  would  be  to  protest  it. 
In  such  a  case  no  possible  harm  could  come  of  the  protest,  and 
the  bank  would  be  relieved  of  all  responsibility  of  deciding 
whether  the  paper  is,  in  fact,  a  forgery.  A  few  of  the  courts 
have  held  that  notice  should  be  given  even  in  the  case  of  a  forged 
paper,  and  even  if  not  required,  this  is  certainly  safer. 


When  Payment  Refused  Because  Signature  Does  Not  Cor- 
respond with  Authorized  Signature,  Safer  to  Protest. 

Where  a  check  is  returned  because  the  signature  does  not  correspond 
with  the  authorized  signature  given  to  the  bank  by  the  depositor,  should 
the  check  be  protested? 

It  is  the  duty  of  a  bank  for  the  protection  of  its  customers, 
as  well  as  for  its  own  protection,  to  decline  to  pay  a  check  unless 
the  signature  corresponds  with  the  one  filed  with  the  bank,  unless 
it  knows  the  check  is  genuine.  The  bank  can  not  safely  determine 
whether  a  signature  is  genuine  except  by  comparison  with  the 
authorized  signature,  and  should  it  pay  on  an  unauthorized  signa- 
ture it  would  take  the  risk  of  doing  so.  To  relieve  the  bank  of  the 
responsibility  of  'deciding  whether  the  paper  was  a  forgery,  it 
would  be  best  to  protest.  The  danger  of  protest  is  so  slight  as 
compared  with  the  risk  of  not  protesting  that  prudence  would 
seem  to  require  protesting  in  all  cases  of  doubt.  In  the  case 
mentioned,  I  do  not  see  how  there  could  be  any  possible  liability 
on  the  bank  or  the  notary  for  making  the  protest.  The  drawer  of 
the  check  could  not  complain  at  its  protest,  because  the  failure  to 
pay  was  directly  for  his  benefit  and  protection,  and  no  other 
party  to  the  paper  would  be  injuriously  affected  by  the  protest.  I 
think,  therefore,  that  the  safe  rule  would  be,  in  cases  of  this 
character,  to  protest  and  to  notify  the  indorsers. 


Unsigned  Checks  Not  Protestable. 
Is  a  check  without  signature  protestable? 

A  check  cannot  be  protested  unless  payment  can  properly  be 
(femanded.    Manifestly,  payment  of  a  check  which  has  not  been 


421 

signed  cannot  be  demanded,  and  such  a  check  therefore  would  not 
be  protestable. 

Voucher  Check  With  Receipt  Attached  When  Receipt  Is  Not 
Signed  as  Required,  Not  Protestable. 

Is  a  voucher  check,  stating  on  its  face  that  it  becomes  a  check  on  a 
named  bank  when  properly  receipted,  protestable  for  nonpayment,  when  it 
is  presented  to  the  bank  for  payment  without  being  receipted  in  the  place 
provided  for  that  purpose,  though  it  is  indorsed  on  the  back?  Is  a  bank 
protesting  such  a  check  liable  in  damages  for  so  doing? 

The  question  does  not  seem;  to  have  been  decided  by  the  courts. 
I  am  of  the  opinion,  however,  that  the  paper  is  not  protestable. 
Until  the  receipt  is  signed,  the  paper  is  incomplete.  It  becomes  a 
check  only  when  it  is  receipted.  Until  the  receipt  is  signed,  it 
is  no  more  entitled  to  payment  than  is  any  other  incomplete  check. 
To  illustrate:  If  a  check  should  be  drawn  without  specifying 
the  amount  or  the  bank  on  which  it  was  drawn,  or  if  the  drawer 
should  fail  to  sign  it,  a  bank  would  not  be  authorized  to  pay  such 
a  check.  No  presentment  for  payment  could  legally  be  made,  and 
as  protest  is  simply  for  the  purpose  of  furnishing  evidence  that 
the  paper  has  been  properly  presented  for  payment  and  payment 
has  been  refused,  such  a  paper  could  not  be  protested.  So,  in  the 
case  of  the  voucher  check  in  question,  until  it  is  receipted  it  is  not 
a  check.  Therefore,  payment  can  not  be  legally  demanded,  and 
as  payment  can  not  be  demanded,  there  is  no  basis  for  protest. 

Again,  a  check  is  in  the  nature  of  an  order  on  a  bank  to  pay  a 
certain  sum  purporting  to  be  on  deposit,  and  there  would  seem 
to  be  no  reason  why  the  drawer  could  not  direct  the  bank  to  pay 
only  when  a  receipt  was  signed.  There  seems  to  be  no  reason 
why,  in  giving  direction  to  the  bank,  a  drawer  can  not  make  any 
reasonable  addition  to  the  mere  order  of  payment.  If  the  person 
to  whom  the  check  is  delivered  is  not  willing  to  accept  it  with 
such  direction,  he  can  reject  it ;  but  if  he  accepts  it,  payable  only 
when  a  receipt  is  signed,  or  with  any  other  direction  to  the  bank 
indorsed  thereon,  he  can  not  insist  that  the  bank  on  which  it  is 
drawn  must  disregard  this  direction  given  to  it  by  its  depositor  on 
the  face  of  the  paper.  And  certainly  it  would  seem  that  the 
bank  would  have  no  authority  to  pay  except  in  accordance  with 
the  direction  of  its  depositor.  Unless  the  bank  is  required  to  pay 
the  check  when  presented,  presentment  to  be  the  basis  of  protest 
cannot  be  made,  and,  therefore,  protest  would  not  be  authorized. 

To   illustrate   again :      A   check   payable   to   the   order   of   a 


422  PARK'S  BANKING  LAW  OF  GEORGIA. 

named  person  cannot  be  legally  presented  for  payment  until  in- 
dorsed by  the  payee,  and  until  so  indorsed  it  is  not  subject  to 
protest.  The  drawer  directs  the  bank  to  pay  to  the  order  of  the 
payee.  This  order  is  given  by  indorsement.  The  bank  has  no 
right  to  pay  until  the  indorsement  is  made.  So,  in  the  present 
case,  the  drawer  directs  the  bank  to  pay  upon  the  receipt  of  the 
payee.  Until  the  receipt  is  signed,  the  bank  would  seem  to  have 
no  right  to  pay. 

As  already  stated,  unless  payment  can  be  legally  demanded, 
a  check  is  not  subject  to  protest,  and  where  the  holder  of  a  check 
unlawfully  causes  a  protest  of  it  to  be  made  and  notice  to  be  given 
to  the  drawer  and  indorsers  without  presentation  for  payment, 
according  to  its  terms,  a  cause  of  action  is  furnished  to  the 
drawer,  who  may  recover  damages  against  the  holder  for.  such 
unlawful  protest. 


Paper  Stamped  "No  Protest,"  but  Billed  as  Protestable,  Should 

Be  Protested. 

Is  a  draft  subject  to  protest  when  "no  protest"  is  stamped  plainly  across 
the  face,  but  which  is  billed  as  protestable? 

The  only  safe  rule  in  regard  to  protest  is, — when  in  doubt, 
protest.  There  is  so  little  risk  in  protesting  as  compared  with  the 
risk  of  not  protesting  that  a  bank  can  never  afford  to  take  the 
risk  where  there  is  any  doubt  on  the  question. 

A  bank  would  be  authorized  to  act  on  the  instructions  of  its 
correspondents  and  protest  or  not,  regardless  of  whether  the 
paper  were  otherwise  protestable.  There  are  sometimes  reasons 
why  a  bank  wishes  a  paper  protested,  although  protest  may  have 
been  waived.  Usually  an  entry  on  the  face  of  a  draft  of  "No 
Protest"  would  be  taken  as  sufficient  authority  not  to  protest.  If 
this  was  on  the  draft  when  it  was  originally  given  it  would  be 
treated  as  a  waiver  of  protest  by  the  original  parties  and  any 
subsequent  indorser,  but  even  in  such  case  a  forwarding  bank 
might  wish  the  paper  protested  and  the  collecting  bank  should  act 
on  its  instructions.  If  a  draft  was  stamped  "No  Protest"  after 
it  had  been  signed  and  put  in  circulation,  this  stamp  would 
not  render  the  paper  nonprotestable  as  against  any  one  who 
signed  it  previously  to  the  entry,  and  if  not  protested  prior  in- 
dorsers would  be  discharged. 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  423 

Bank  Not  Liable  for  Failure  to  Protest  When  "No  Protest" 
Slip  Attached,  Though  Paper  Sent  Protestable. 

Is  a  bank  liable  for  not  protesting  a  draft  received  in  a  collection  letter 
indicating  that  it  is  protestable,  but  to  which  is  attached  a  slip  marked 
"no  protest,  take  this  off  before  presenting"? 

The  bank  would  be  justified  in  acting  on  the  slip  attached  to 
the  draft,  and  if  it  failed  to  protest  would  not  be  liable  for  such 
failure,  although  loss  may  have  resulted.  But,  as  stated  in  the 
preceding  opinion,  the  draft  having  been  sent  protestable,  the 
bank  would  be  authorized  to  protest  in  spite  of  the  "No  Protest" 
slip,  and  it  would  be  safer  generally  to  do  so. 


Where   "No   Protest"   Slip   Detached,   Draft  Becomes 
Protestable. 

A  draft  has  attached  to  it  a  perforated  slip  bearing  the  words,  "no  pro- 
test." Can  the  draft  be  made  protestable  by  tearing  off  this  slip? 

Any  holder  of  a  draft  has  the  right  to  insist  on  protest,  even 
though  the  draft  be  drawn  on  a  blank  having  the  words,  "no 
protest,"  attached  by  a  perforated  slip.  Any  holder  can  make 
such  a  draft  protestable  by  tearing  off  the  slip.  Certainly  if  a 
bank  received  the  draft  without  such  slip  attached  and  with  pro- 
test not  waived  in  any  way,  it  would  be  its  duty  to  protest. 


Sureties  Not  Relieved  by  Failure  to  Protest. 

Is  it  necessary  to  protest  a  note  in  order  to  bind  accommodation  in- 
dorsers  or  sureties? 

Protest  is  only  necessary  to  bind  technical  indorsers.  Wher- 
ever an  indorsement  is  necessary  in  order  to  transfer  the  title, 
the  paper  must  be  protested  and  the  indorser  notified.  This  is 
true  regardless  of  whether  the  indorsement  is  for  value  or  merely 
for  accommodation.  Protest  is  not  necessary  in  order  to  bind 
sureties,  whether  the  surety  signs  on  the  face  of  the  paper  as 
surety  or  writes  his  name  upon  the  back  as  an  accommodation 
indorser,  his  indorsement  not  being  necessary  to  transfer  the  title 
to  the  paper." 


424  PARK'S  BANKING  LAW  of  GEORGIA. 

Bank  Is  Liable  for  Failure  to  Protest  a  Protestable  Paper  as 

Instructed. 

A  draft  payable  to  a  bank  was  deposited  for  collection.  The  bank  sent 
the  draft  direct  to  the  bank  upon  which  it  was  drawn.  The  draft  was  sent 
subject  to  protest,  but  was  returned  unprotested.  It  was  sent  back  with 
instructions  to  protest,  and  was  again  returned  unprotested.  Can  the  for- 
warding bank  make  the  bank  on  which  the  draft  was  drawn  pay  it,  be- 
cause of  the  failure  to  protest? 

Where  a  protestable  paper  is  sent  to  a  bank  for  collection  with 
instructions  to  protest,  and  the  bank  fails  to  protest  in  accord- 
ance with  these  instructions,  and  an  indorser  is  released  by  such 
failure,  and  loss  results  therefrom,  the  bank  would  be  liable. 

But  from  the  facts  stated,  I  do  not  see  why  it  was  necessary  to 
protest  this  draft.  Protest  is  only  necessary  in  order  to  bind  tech- 
nical indorsers  on  a  paper.  There  were  no  indorsers  on  this 
paper  to  be  bound,  and,  therefore,  protest  was  not  necessary.  If 
the  draft  was  made  payable  to  the  first  bank  and  it  forwarded  it 
to  the  drawee,  and  the  draft  did  not  pass  through  the  hands  of 
anybody  else,  there  necessarily  could  have  been  no  indorsers  on 
the  paper  to  bind  whom  protest  was  necessary. 

The  only  object  of  protest  and  notice  is  to  preserve  the  liability 
of  indorsers,  and,  of  course,  if  there  are  no  indorsers  it  is  entirely 
immaterial  whether  or  not  a  paper  is  protested. 


A  Paper  Presented  After  Maturity  Is  Not  Protestable. 

A  protestable  paper  is  forwarded  to  a  bank  for  collection  after  its  ma- 
turity. It  is  presented  to  the  maker  and  payment  refused.  Is  it  protest- 
able  under  these  circumstances? 

I  do  not  think  so.  In  order  to  hold  indorsers  on  a  note  payable 
on  a  fixed  day,  the  note  must  be  presented  for  payment  on  the  day 
on  which  it  matures.  A  presentment  before  or  after  this  day  is 
not  sufficient. 

I  quote  from  two  or  three  recognized  authorities : 

"In  respect  to  the  drawer  of  a  bill  and  the  indorser  of  a  bill  or 
note,  it  is  essential  to  the  fixing  of  their  liability  that  the  pre- 
sentment should  be  made  on  the  day  of  maturity,  provided  it  is 
within  the  power  of  the  holder  to  make  it.  If  the  presentment  be 
made  before  the  bill  or  note  is  due,  it  is  entirely  premature  and 
nugatory,  and,  so  far  as  it  affects  the  drawer  or  indorser,  a  per- 
fect nullity.  And  if  it  be  made  after  the  day  of  maturity,  it  can, 
as  matter  of  course,  be  of  no  effect,  as  the  drawer  or  indorser  will 
already  have  been  discharged,  unless  there  were  sufficient  legal 
excuse  for  the  delay."  Daniel  on  Negotiable  Instruments,  §  598. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  425 

"In  order  to  hold  the  drawer  and  indorsers,  it  is  necessary  to 
present  the  paper  for  payment  on  the  day  of  maturity.  And  pre- 
sentment before  or  after  the  day  of  maturity  will  not  be  sufficient, 
unless  the  holder  has  some  valid  excuse  for  not  making  the  pre- 
sentment on  the  exact  day  of  maturity."  Tiedeman  on  Commer- 
cial Paper,  §  315. 

And,  says  the  author  last  quoted : 

"If  the  paper  is  sent  to  an  agent  for  collection,  or  transferred 
for  consideration,  so  near  to  the  day  of  maturity,  that  it  is  im- 
possible to  present  for  payment  on  the  day  of  maturity,  the  pre- 
sentment and  notice  will  be  excused,  at  least  as  to  the  indorser 
who  had  caused  the  delay.  But  it  will  be  no  excuse  as  to  the  prior 
indorsers,  who  had  not  necessitated  the  delay."  §  361. 

Protest  is  intended  to  furnish  to  the  holder  legal  evidence  of 
the  fact  that  the  required  presentment  and  demand  for  payment 
has  been  made  and  notice  of  dishonor  given,  in  order  that  this 
evidence  may  be  used  in  an  action  brought  on  the  paper  against 
the  drawer  and  indorsers. 

Wherever  presentment  for  any  reason  cannot  be  made  at  the 
time  or  place  required,  protest  cannot  lawfully  be  made,  for  the 
protest,  as  above  stated,  is  only  for  the  purpose  of  furnishing  evi- 
dence of  the  fact  that  presentment  and  demand  for  payment  has 
been  made. 

At  the  time  the  paper  in  question  reached  the  collecting  bank 
it  was  already  past  due.  Presentment  not  having  been  made 
to  the  maker  on  the  day  of  maturity,  the  indorsers  were  al- 
ready discharged.  Presentment  was  not  necessary  in  order  to 
bind  the  maker  of  the  note,  or  the  indorser  whose  delay  caused 
the  failure  to  present  on  the  day  of  maturity.  Therefore,  pre- 
sentment after  maturity  had  no  effect  so  far  as  the  liability  of  any 
of  the  persons  on  the  paper  was  concerned,  and  protest  was  for 
that  reason  unnecessary. 


A  Check  May  Be  Protested  Immediately  Upon  Presentment 
and  Refusal  of  Payment. 

Where  a  check  is  presented  to  a  bank  through  a  clearing  house  or  by 
another  bank  at  a  clearing,  is  it  protestable  as  soon  as  payment  is  refused, 
even  though  a  deposit  sufficient  to  cover  the  check  be  subsequently  made 
on  same  day  before  closing  hour? 

A  check  being  drawn  presumably  against  funds  on  deposit  is 
protestable  as  soon  as  presented  and  payment  refused.  However, 
before  it  could  be  protested,  it  would  have  to  be  presented  by  a 


426  PARK'S  BANKING  LAW  OF  GEORGIA. 

notary  public  and  payment  demanded  by  him.  Presentation 
through  a  clearing  house  or  by  another  bank  at  a  clearing  is  not 
such  a  presentation  and  demand  for  payment  as  would  authorize 
protest.  The  rule  that  the  acceptor  of  a  bill  of  exchange  or 
the  maker  of  a  note  may  make  payment  at  any  time  during  busi- 
ness hours  of  the  day  on  which  the  paper  is  due  does  not  seem 
to  apply  to  a  check  for  the  reason  that  a  check  is  drawn  against 
a  fund  presumably  in  bank  at  the  time  it  is  given,  and' therefore, 
whenever  payment  is  formally  demanded  by  a  notary  public  the 
check  may  be  protested.  As  to  the  propriety  of  protesting  a 
check  before  the  bank  closes  on  the  day  in  which  it  is  presented, 
the  bank  holding  the  check  would,  of  course,  have  to  judge.  It 
would  seem  where  a  deposit  is  made  on  the  day  that  the  check  is 
presented,  that  the  check  should  not  be  protested.  This,  however, 
is  a  mere  matter  of  policy. 


Date  of  Original  Maturity  of  Paper  Is  Proper  Time  for  Pre- 
sentment and  Protest  Rather  Than  Extended  Due  Date, 
Unless  Agreed  to  by  All  Parties. 

Where  there  is  an  extension  of  the  time  of  payment  of  a  note,  is  the 
date  of  the  expiration  of  the  extension  or  the  date  of  the  original  ma- 
turity the  proper  time  for  protest?  The  particular  case  is  this:  A  note  is 
sent  for  collection,  and  on  the  day  it  falls  due  the  forwarding  bank  wires 
the  collecting  bank  to  extend  payment  for  a  week.  This  is  done.  At  the 
expiration  of  the  week's  extension,  the  maker  defaults.  The  question  is 
whether  the  note  should  be  protested  then. 

The  rule  is  that  paper  must  be  presented  for  payment  on  the 
date  of  its  maturity. 

Of  course,  if  all  the  parties  liable  on  a  note  agree  with  the 
holder  on  an  extension  for  a  definite  time,  this  extension  would 
become  the  day  of  the  maturity,  taking  the  place  of  the  original 
due  day,  and  in  such  event  the  paper  should  be  presented  for  pay- 
ment on  the  new  due  date  rather  than  on  the  original  date.  If  not 
paid  then,  it  could,  of  course,  be  protested.  But  I  do  not  under- 
stand that  any  such  extension  as  this  had  been  agreed  on  in  the 
case  mentioned.  It  appears  simply  that  the  forwarding  bank 
wired  its  correspondent  to  hold  the  paper  for  a  week.  If  this 
was  all,  and  the  indorsers  did  not  agree  to  such  an  extension,  the 
paper  could  not  be  legally  protested  at  the  end  of  the  extension, 
since  then  the  indorsers  would  already  be  discharged. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  427 

Not  Necessary  to  Protest  Draft  a  Second  Time  on  Second 

Presentation. 

Should  a  draft  be  protested  a  second  time  upon  a  second  presentation? 

There  is  no  reason  for  a  second  protest  and  no  law  authorizing 
it.  Protest  is  for  the  purpose  of  furnishing  ready  proof  of  the 
presentation  of  a  negotiable  instrument  and  refusal  to  accept  or 
to  pay,  as  the  case  may  be.  It  was  formerly  confined  entirely  to 
foreign  bills  of  exchange,  and  was  allowed  because  of  the  exceed- 
ing difficulty  of  proving  the  presentation  and  refusal  to  pay  in 
cases  of  this  character. 

Where  a  paper  has  once  been  formally  presented  by  a  notary 
public  and  protested  for  nonacceptance  or  nonpayment,  and  the 
indorsers  properly  notified  that  acceptance  or  payment  has  been 
refused,  they  are  bound  on  the  paper.  They  would  not  be  any 
more  bound  by  any  number  of  subsequent  presentations;  and 
as  protest  is  for  the  purpose  of  notifying  the  indorsers  and,  there- 
fore, holding  them  liable,  it  would  seem  to  be  entirely  useless 
to  protest  and  notify  more  than  once. 


Where  Place  of  Payment  Not  Stated,  Note  Must  Be  Presented 
to  Maker  in  Person  or  at  His  Office  or  Residence. 

If  a  note  is  not  made  payable  at  any  specified  place,  where  must  it  be 
presented  for  payment  in  order  to  protest  if  not  paid? 

It  would  be  necessary  for  the  notary  to  present  the  note  either 
to  the  maker  in  person  or  at  his  place  of  business,  if  he  has  any, 
if  not,  at  his  residence. 


Presentment  at  Office  During  Business  Hours  Sufficient, 
Though  Payee  Is  Out. 

If  a  draft  is  presented  at  the  office  of  the  payee  and  he  is  out,  is  this  a 
sufficient  presentment  to  authorize  protest? 

A  bill  of  exchange,  note  or  draft,  which  is  not  payable  on  its 
face  at  a  particular  place,  should  be  presented  for  payment  at 
the  office  of  the  payee  during  business  hours,  and  when  so  pre- 
sented by  a  notary,  should  be  protested  regardless  of  whether  the 
payee  happens  to  be  in  his  office  at  the  time  presentment  is  made. 


428  PARK'S  BANKING  LAW  OF  GEORGIA. 

Sight  Draft  Can  Be  Presented  at  Place  of  Payment  or  at 
Drawee's  Office,  Though   He  Is  Out  of  Town,  and  Pro- 
tested. 

Is  a  sight  draft  protestable  if  the  person  on  whom  it  is  drawn  is  out  of 
town  ? 

An  ordinary  draft  is  a  domestic  bill  of  exchange,  and  where 
negotiated  through  a  bank,  under  the  terms  of  the  Code  section 
quoted  in  a  previous  opinion,  it  would  be  protestable  in  order  to 
bind  the  indorsers.  The  fact  that  it  is  payable  at  sight  instead  of 
at  a  given  time  does  not  prevent  it  from  being  a  protestable  paper. 
If  the  paper  on  its  face  is  payable  at  a  particular  place,  it  should 
be  presented  at  that  place.  If  not,  it  should  be  presented  at  the 
business  office  of  the  drawee  if  he  has  a  regular  business  office, 
and  if  not,  at  his  residence.  It  makes  no  difference  whether  it 
is  presented  to  the  drawee  in  person  or  not,  if  it  is  presented  at 
the  place  of  payment  named  in  the  bill  or  at  the  business  office  or 
residence,  if  no  business  office  is  maintained..  The  fact  that 
the  drawee  may  be  out  of  town,  and,  therefore,  that  it  may  be  im- 
possible to  present  to  him  in  person,  would  not  prevent  the  bill 
from  being  protestable  or  relieve  the  bank  of  the  duty  of  making 
protest  when  the  bilfis  properly  presented  at  the  place  of  pay- 
ment or  place  of  business  or  residence,  as  above  stated. 


Where  Check  Drawn  on  Branch  Bank,  Presentment  at  Parent 
Bank  Unauthorized. 

Where  a  check  is  drawn  on  a  branch  bank  and  presented  for  payment 
to  the  parent  bank,  or  vice  versa,  can  it  be  protested  without  presentation 
to  the  one  on  which  it  is  drawn? 

If  the  parent  bank  and  the  branch  are  conducted  separately, 
each  having  its  own  customers,  the  accounts  of  the  two  being  kept 
entirely  separate,  and  the  two  banks  being  located  in  different 
buildings,  I  do  not  think  there  would  be  any  obligation  on  the 
officers  of  the  bank  to  present  a  check  drawn  on  the  parent  bank 
to  the  branch  for  payment  or  to  present  a  check  drawn  on  the 
branch  to  the  parent  bank.  A  check  could  properly  be  protested 
where  drawn  on  either  bank  and  the  drawer  had  no  funds  in  that 
bank  with  which  to  meet  it,  though  he  might  have  funds  in  the 
other  bank. 

This,  however  depends  somewhat  on  custom,  and  the  way  in 
which  the  two  institutions  are  conducted.  If  it  has  been  custom- 


OPINIONS  OF  THE  GENERAL  COUNSEL.  429 

ary  to  present  or  pay  checks  at  either  the  parent  or  branch,  re- 
gardless of  whether  they  were  drawn  on  the  parent  or  branch,  or 
if  the  branch  is  a  mere  agency  and  not  conducted  separately  and 
as  a  distinct  institution,  I  do  not  think  the  bank  would  be  author- 
ized to  refuse  payment  where  either  the  parent  bank  or  branch 
carried  the  account  of  the  depositor. 


Notice  of  Dishonor  Must  Be  Mailed  to  Indorser  on  the 
Next  Day. 

Has  the  notary  twenty-four  hours  in  which  to  mail  the  notice  of  pro- 
test? 

The  statute  provides  that  "notice  of  nonpayment  or  nonaccept- 
ance  must  be  given  to  the  indorsers  within  a  reasonable  time 
either  personally  or  by  post." 

What  is  a  reasonable  time  is  generally  a  question  of  fact 
depending  on  the  circumstances.  The  Supreme  Court  seems 
never  to  have  directly  decided  whether  a  notary  has  the  day 
succeeding  the  day  of  protest  in  which  to  mail  the  notice,  but 
in  the  case  of  Apple  v.  Lesser,  93  Ga.  751,  it  quotes  from  Daniel 
on  Negotiable  Instruments  explaining  what  is  a  reasonable  time 
as  follows :  "The  notice  should  be  deposited  in  the  post  in 
time  to  be  sent  by  the  mail  of  the  day  after  dishonor,  provided, 
such  mail  is  not  closed  before  early  and  convenient  business 
hours  of  that  day,  in  which  case  it  must  be  sent  by  the  next 
mail  thereafter."  The  rule  as  laid  down  here  is  the  one  gen- 
erally adopted. 


Notary  Public  Who  Is  a  Stockholder  in  a  Bank  Is  Not  Dis- 
qualified to  Protest  Papers  for  the  Bank. 

Can  the  cashier  of  a  bank  who  is  a  stockholder  thereof  and  who  is  a 
notary  public  legally  protest  papers  for  the  bank? 

The  Supreme  Court  has  decided  the  precise  question  in  the 
case  of  Patton  v.  Bank  of  Lafayette,  124  Ga.  965,  973,  from 
which  I  quote : 

"The  fact  that  the  notary  was  a  stockholder  in  the  bank  and 
had  an  indirect  pecuniary  interest  in  the  note,  did  not  render  him 
incompetent  to  protest  it  for  nonpayment." 


430  PARK'S  BANKING  LAW  OF  GEORGIA. 

Notary  Public  Not  Entitled  to  Fee  Where  Paper  Presented 

Before  Due. 

Is  a  notary  public  entitled  to  a  fee  for  protesting  a  draft  which  is  drawn 
at  three  days'  sight,  is  presented  on  the  date  of  its  receipt,  protested,  and 
returned  to  the  forwarding  bank? 

A  paper  drawn  payable  at  so  many  days'  sight  is  not  due  until 
the  required  number  of  days  after  it  is  presented.  It  could,  there- 
fore, not  be  protested  for  nonpayment  until  the  number  of  days 
required  had  expired.  Any  protest  before  the  expiration  of  the 
time  would  be  premature,  and  the  notary  would  not  be  entitled  to 
his  fee. 

I  understand  from  the  question  that  the  paper  was  not  pre- 
sented for  acceptance  and  protested  for  nonacceptance,  but  was 
presented  for  payment  and  protested  for  nonpayment.  If  the 
party  on  whom  the  paper  was  drawn  refused  to  accept  it,  the 
notary  would  have  been  authorized  to  protest  for  nonacceptance ; 
but  if  the  paper  was  presented  for  payment  before  the  expiration 
of  the  three  days  after  sight,  the  paper  not  being  payable  at  that 
time,  protest  would  be  premature,  and  the  notary  would  not  be 
entitled  to  his  fee. 


Protest  Fees  on  Check  May  on  Payment  of  Check  Be  Charged 
to  Drawer's  Account. 

When  a  payee  bank  protests  a  check  for  insufficient  funds  and  later  the 
drawer  deposits  sufficient  funds  and  the  check  is  returned  to  the  bank 
with  instructions  to  collect  the  amount  of  the  check  plus  the  protest  fees, 
is  it  proper  to  charge  the  check  with  protest  fees,  to  the  drawer's  account 
without  further  instructions  from  him? 

So  far  as  I  know,  the  question  here  presented  has  never  been 
passed  upon  by  our  courts.  There  can  be  no  question  of  the  right 
of  the  bank  to  charge  a  check  which  had  been  turned  down  for 
lack  of  funds,  to  the  account  of  the  depositor,  when  his  deposit 
is  sufficient,  without  any  express  authority  from  the  depositor.  If 
the  check  had  been  held  out  for  a  considerable  period,  just  how 
long  it  would  be  impossible  to  say,  it  might  be  regarded  as  a  stale 
check,  and  the  bank  paying  it  without  authority  would  take  the 
risk  of  the  drawer  having  already  settled  with  or  paid  the  payee. 
The  fact  that  the  check  had  been  protested  and  held  for  a  con- 
siderable period  might  strengthen  this  presumption.  But  if  no 
considerable  time  had  elapsed  between  th«  first  presentment  of 
the  check  and  the  second,  there  would  be  no  question  of  the 


OPINIONS  OF  THS  GENERAL  COUNSEL.  431 

bank's  right  to  charge  the  check  to  the  depositor's  account  without 
any  instructions. 

I  am  also  of  the  opinion  that  it  would  have  the  right  to  charge 
the  amount  of  the  protest  fees,  treating  them  as  a  part  of  the 
check.  The  drawer  of  the  check  would  unquestionably  be  liable 
for  these  fees  and  I  do  not  think  he  would  be  in  position  to  ques- 
tion the  authority  of  the  bank  to  include  them  as  a  part  of  the 
check,  though  I  confess  there  is  some  doubt  on  the  question.  A 
check  is  a  direct  order  from  the  depositor  to  the  bank  to  pay  a 
definite  amount.  There  is  no  such  order  for  payment  of  the 
protest  fees,  and  it  might  be  that  such  payment  would  be  treated 
as  unauthorized. 

However,  if  I  were  an  officer  of  the  bank  and  such  check  was 
presented  the  second  time,  I  would  pay  it,  charging  the  check 
and  the  protest  fees  to  the  depositor  unless,  as  above  indicated, 
the  check  had  been  held  out  for  considerable  time. 


Bank  Having  Check  Protested  When  Payment  Has  Not  Been 
Refused  Liable  for  Protest  Fees  as  Well  as  for  Damages. . 

A  check  for  $26.06  is  presented  to  the  drawee  bank  through  another 
bank,  which  insists  on  the  payment  of  $26.09.  The  check  is  returned  by 
the  drawee  with  statement  indorsed  on  it  that  it  is  only  for  $26.06.  Is  the 
check  subject  to  protest,  and  if  not,  who  is  liable  for  protest  fees? 

There  is  scarcely  any  doubt  that  the  check  should  not  have  been 
protested.  The  drawee  bank  could  only  pay  the  amount  of  the 
check  and  was  justified  in  refusing  to  pay  anything  more  than 
that  amount.  If  the  bank  presenting  the  check  refused  to  accept 
the  amount  called  for  by  the  check,  insisting  on  a  larger  amount, 
then  there  was  no  refusal  to  pay  the  amount  called  for  by  the 
check,  and  until  there  has  been  a  demand  and  refusal  a  check  is 
not  protestable. 

As  the  presenting  bank  caused  the  check  to  be  protested  with- 
out authority,  it  is  liable  for  the  protest  fees  of  the  notary  public, 
and  it  may  be  added  that  if  any  damage  resulted  from  the  wrong- 
ful protest  of  the  check,  the  bank  causing  the  protest  would  be 
liable  for  this  damage  also. 


432  PARK'S  BANKING  LAW  OF  GEORGIA. 

Protest  May  Be  Waived  in  Face  of  Paper. 

Is  a  clause  in  a  note  waiving  protest  and  notice  legal  and  valid? 

Protest  may  be  waived ;  and  where  a  note  on  its  face  contains 
a  waiver  of  protest,  protest  is  not  necessary  in  order  to  bind  in- 
dorsers.  The  rule  is  clearly  stated  as  follows  in  Tiedeman  on 
Commercial  Paper,  §  363,  p.  626: 

"If  the  waiver  is  put  in  the  body  of  the  instrument,  it  enters 
into  and  forms  a  part  of  the  contract  of  every  one  who  signs  his 
name  to  the  paper,  whether  as  drawer  or  indorser." 


Maker  Can  Not  Waive  Protest  After  Paper  Has  Been 
Negotiated. 

Has  the  maker  of  a  negotiable  instrument  at  the  maturity  thereof  the 
right  to  waive  protest? 

Nothing  that  the  maker  can  do  after  the  paper  has  been  in- 
dorsed can  bind  the  indorsers.  To  have  the  paper  protested  under 
the  circumstances  prescribed  by  the  Code  is  a  right  of  the  in- 
dorser, which,  of  course,  the  maker  can  not  waive.  Protest  can 
be  waived  in  the  face  of  a  paper,  and  where  a  waiver  of  this 
kind  is  included,  protest  would  not  be  necessary.  After  the 
paper  is  complete  and  has  actually  been  negotiated,  the  maker  can 
not  waive  any  right  of  the  indorsers. 


Waiver  of  Demand  Is  Equivalent  to  Waiver  of  Protest. 

Does  a  waiver  of  demand  for  payment  upon  a  promissory  note  negoti- 
ated at  a  chartered  bank  constitute  a  waiver  of  protest? 

The  Supreme  Court  of  Georgia  has  held  that  a  written  waiver 
of  "demand  and  notice"  on  the  part  of  an  indorser  is  in  effect  a 
waiver  of  demand  and  refusal  and  protest  therefor.  National 
Exchange  Bank  v.  Kimball,  66  Ga.  753. 

The  court  has  also  held  that  where  a  draft  waived  protest,  this 
included  a  waiver  of  notice,  Williams  v.  Lewis,  69  Ga.  825 ;  and 
that  the  same  facts  which  dispense  with  notice  of  dishonor  or 
excuse  the  holder  from  giving  notice  will  render  protest  unnec- 
essary, Hull  v.  Myers,  90  Ga.  674.  While  these  cases  do  not  ex- 
pressly hold  that  a  waiver  of  demand  also  waives  protest,  they 
practically  decide  the  question. 


OPINIONS  of  THE  GENERAL  COUNSEL.  433 

On  principle,  it  seems  that  a  waiver  of  demand  is  necessarily 
equivalent  to  the  waiver  of  protest.  The  purpose  of  protest  and 
notice  by  a  notary  is  to  furnish  to  the  holder  legal  evidence  of  the 
fact  that  presentment  and  demand  for  payment  has  been  made. 
Formerly,  protest  was  not  required  except  in  case  of  foreign  bills 
of  exchange,  and  it  was  required  there  as  furnishing  an  easy  and 
cheap  method  of  proving  the  fact  that  the  bill  had  been  properly 
presented  and  that  a  demand  for  payment  had  been  made. 

If  the  demand  for  payment  is  waived,  there  would  seem  to  be 
no  basis  for  a  protest,  nor  indeed  would  a  notary  be  authorized 
to  protest  except  in  case  of  making  formal  presentment  and  de- 
mand for  payment.  If  no  protest  is  made,  of  course  no  notice 
could  be  given ;  hence  it  seems  that  a  waiver  of  demand  is  equiva- 
lent to  waiving  protest,  which  is  merely  evidence  of  a  demand 
and  that  protest  for  nonpayment  has  been  made,  and  this  would 
come  under  the  reasoning  of  the  case  of  Hull  v.  Myers  above 
referred  to,  as  being  a  fact  which  would  excuse  or  dispense  with 
the  giving  of  the  notice  and  therefore  render  protest  unnecessary. 


Where  Protest  Waived,  Bank  Not  Liable  for  Not  Protesting, 
Though  Paper  Sent  with  Instructions  to  Protest. 

Where  a  waiver  of  protest  is  contained  in  a  note,  but  the  forwarding 
bank  instructs  the  collecting  bank  to  protest,  does  failure  to  protest  re- 
lieve the  indorsers?  Is  the  collecting  bank  liable  for  failure  to  protest? 

Protest  may  be  waived,  and  where  a  note  on  its  face  contains 
a  waiver  of  protest, — especially  where  it  states  that  protest  is 
waived  not  only  by  the  maker,  but  by  indorsers  as  well, — protest 
is  not  necessary  in  order  to  bind  indorsers.  Protest  not  being 
necessary  in  order  to  bind,  of  course,  the  indorsers  would  not  be 
relieved  by  the  failure  to  protest. 

I  do  not  think  a  bank  could  be  held  liable  for  failure  to  protest 
a  note  which  is  not  pfotestable  or  one  which  it  is  not  necessary 
to  protest  in  order  to  bind  indorsers.  The  theory  on  which  a 
bank  would  be  liable  for  failure  to  protest  is  that  it  has  neglected 
to  do  something  by  reason  of  which  loss  has  resulted.  As  no  loss 
could  result  from  the  failure  to  protest  a  paper  where  protest 
has  been  waived,  the  bank  could  not  be  held  liable  for  failure  to 
carry  out  instructions.  I  think,  however,  that  it  would  be  entirely 
proper  for  the  bank  to  obey  instructions  and  protest,  even  though 
protest  was  waived. 
28 


434  PARK'S  BANKING  LAW  OF  GEORGIA. 

Waiver  of  Protest  Is  Not  Affected  by  Bankruptcy  of  One  of 

the  Parties. 

When  protest  is  waived,  and  one  of  the  parties  to  the  note  goes  into 
bankruptcy,  is  it  necessary  to  protest  the  note? 

It  is  not  necessary  to  protest  a  note  where  the  protest  is  waived. 
Nor  is  it  generally  necessary  in  such  cases  to  formally  present  the 
paper  at  the  place  of  payment ;  that  is  to  say,  the  indorsers  would 
not  be  discharged  for  failure  to  make  such  presentment.  The 
bankruptcy  of  one  of  the  parties  does  not  change  the  rule. 


REDISCOUNT. 


Bank's  Statement  Must  Show  Rediscounts. 

Is  there  any  way  in  which  a  small  bank  can  indorse  a  customer's  note 
and  hold  the  collateral  and  receive  the  proceeds  from  the  rediscount  for 
the  customer's  credit,  and  not  report  the  same  as  a  rediscount? 

I  do  not  see  how  this  can  be  done.  If  the  bank  rediscounts 
the  paper  under  its  indorsement,  this  creates  a  liability  against  it 
as  indorser,  and  is  a  technical  rediscount  which  ought  to  appear 
in  the  bank's  statement. 


RENT. 

Landlord's   Lien  for   Rent    (Except   on   Crops)    Ranks  with 
Other  Liens  from  the  Levy  of  Distress  Warrant.     , 

Is  a  judgment  against  a  tenant  superior  to  the  landlord's  claim  for  rent? 

A  judgment  is  superior  to  a  claim  for  rent  (except  upon  the 
crop  made  on  the  rented  lands),  unless  a  distress  warrant  has 
been  issued  and  levied.  A  landlord's  general  lien  for  rent  ranks 
with  other  liens  from  the  levy  of  a  distress  warrant.  The  special 
lien  on  crops  is  superior  to  judgments  and  all  other  liens  except 
taxes.  I  quote  the  sections  of  the  Code  governing  the  matter : 

"Landlords  shall  have  a  special  lien  for  rent  on  crops  made  on 
land  rented  from  them,  superior  to  all  other  liens  except  liens  for 
taxes,  to  which  they  shall  be  inferior,  and  shall  also  have  a  gen- 
eral hen  on  the  property  of  the  debtor,  liable  to  levy  and  sale,  and 
such  general  lien  shall  date  from  the  time  of  the  levy  of  a  dis- 
tress warrant  to  enforce  the  same. 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  435 

"Such  general  lien  of  landlords  shall  be  inferior  to  liens  for 
taxes  and  the  general  and  special  lien  of  laborers,  but  shall  rank 
with  other  liens,  and  with  each  other  according  to  date,  the  date 
being  from  the  time  of  levying  a  distress  warrant.  The  special 
liens  of  landlords  for  rent  shall  date  from  the  maturity  of  the 
crops  on  the  lands  rented,  unless  otherwise  agreed  on,  but  shall 
not  be  enforced  by  distress  warrant  until  said  rent  is  due,  unless 
the  tenant  is  removing  his  property,  or  when  other  legal  process 
is  being  enforced  against  said  crops,  when  the  landlord  may,  as 
provided  elsewhere  in  this  Code,  enforce  said  liens,  both  general 
and  special."  Park's  Ann.  Code,  §§  3340,  3341. 


Transfer  of  Landlord's  Lien  for  Rent  Does  Not  Have  to 
Be  Recorded. 

Where  a  landlord's  lien  is  transferred  should  it  be  recorded? 

There  is  no  provision  in  our  statute  for  recording  a  landlord's 
lien,  whether  it  is  the  general  lien  given  the  landlord  on  all  the 
property  of  his  tenant  or  the  special  lien  on  the  crops  raised  on 
the  rented  premises ;  nor  is  there  any  provision  requiring  the 
recording  of  the  lien  given  to  the  landlord  for  supplies  furnished 
to  tenants  to  make  crops.  Of  course,  a  mortgage  given  on  a  crop 
would  have  to  be  recorded  as  any  other  mortgage.  All  of  these 
liens  are  subject  to  transfer,  but  there  is  nothing  requiring  the 
transferred  lien  to  be  recorded,  except  in  case  of  a  mortgage. 


SAFETY  DEPOSIT  BOXES. 


Bank  Renting  Deposit  Boxes  Liable  for  Ordinary  Care. 

Is  a  bank  renting  safety  deposit  boxes  to  its  customers  liable  for  the 
theft  of  money  or  securities  deposited  therein? 

While  a  general  deposit  creates  merely  the  relation  of  debtor 
and  creditor,  a  special  deposit  renders  the  bank  liable  as  deposi- 
tary or  bailee,  the  liability  being  the  same  as  that  of  a  warehouse- 
man. If  the  deposit  is  gratuitous,  the  bank  is  liable  only  for 
gross  neglect,  but  where  a  consideration  is  paid  for  the  use  of  the 
safety  deposit  box,  the  bank  is  bound  to  exercise  ordinary  care 
and  diligence  in  protecting  the  property  deposited  therein. 
Ordinary  care  and  diligence  is  that  care  which  an  ordinarily  pru- 
dent man  exercises  under  the  same  circumstances  in  his  own  in- 


436  PARK'S  BANKING  LAW  OF  GEORGIA.  ; 

terest  or  for  the  protection  of  his  own  property.  What  is  ordinary 
care  and  diligence  in  any  particular  instance  depends  upon  the  cir- 
cumstances and  conditions  under  which  the  deposit  is  made  and 
the.  representation  made  by  the  depositary.  In  case  of  a  loss  by 
theft,  the  burden  is  on  the  bank  to  show  that  it  exercised  ordinary 
care  and  diligence ;  and  if  it  can  show  this,  it  is  not  liable. 

Ordinarily,  a  bank  would  not  be  liable  for  a  burglary  where 
its  safety  deposit  boxes  are  of  the  type  in  general  use,  or  where 
the  depositor  knows  the  character  of  the  boxes  when  he  makes 
the  deposit  and  where  the  boxes  are  protected  in  the  usual 
manner. 


SET-OFF. 


Bank  May  Set  Off  Deposit  Against  Matured  Note. 

A  bank  holds  a  past  due  note  of  a  customer,  who  has  on  deposit  an 
amount  more  than  sufficient  to  cover  the  note.  Has  the  bank  the  right 
to  apply  the  amount  on  deposit  to  the  payment  of  the  note? 

The  bank  has  the  right  to  apply  enough  of  the  amount  on  de- 
posit to  the  credit  of  the  customer  to  satisfy  its  claim  against  him. 
The  rule  is  thus  stated  in  Michie  on  Banks  and  Banking,  Vol. 
2,  pp.  1009,  1011: 

"The  rule  that  a  bank  has  a  general  lien  upon  or  right  of  set  off 
against  all  moneys  or  funds  in  its  possession  belonging  to  a  de- 
positor to  secure  the  payment  of  the  depositor's  indebtedness  is  a 
part  of  the  law  merchant,  and  well  established  in  commercial 
transactions.  *  *  *  It  rests  upon  the  principle  that  as  the 
depositor  is  indebted  to  the  bank  upon  a  demand  which  is  due, 
the  funds  in  its  possession  may  properly  and  justly  be  applied  in 
payment  of  such  debt,  and  it  has,  therefore,  a  right  to  retain  such 
funds  until  payment  is  actually  made.  *  *  *  A  bank  to 
which  a  depositor  owes  a  matured  debt  may  set  off  or  apply  such 
depositor's  general  deposit  to  the  discharge  of  such  debt." 


Bank  May  Set  Off  Deposit  Against  Note  of  Insolvent  Debtor 
Before  Maturity. 

Where  a  depositor  owes  a  bank  a  note,  can  the  bank  upon  the  insolvency 
of  the  depositor,  apply  his  deposit  in  satisfaction  of  the  note? 

This  question  has  been  decided  by  the  Supreme  Court  of 
Georgia.  I  quote  from  the  case  of  Georgia  Seed  Co.  v.  Talmadge, 
96  Ga.  254: 


OPINIONS  OF  THE  GENERAL  COUNSEL.  437 

"Where  a  bank,  having  money  on  deposit  with  another,  failed 
in  business  and  became  insolvent,  being  at  the  time  indebted  to 
the  depositary  upon  promissory  notes,  the  sum  total  of  which 
exceeded  the  amount  of  the  deposit,  it  was  the  right  of  the 
depositary,  by  way  of  equitable  set  off,  to  appropriate  the  money 
on  deposit,  as  far  as  it  would  go,  to  the  satisfaction  of  such  notes, 
although  they  had  not  yet  become  due." 


Bank  May  Call  a  Demand  Note  and  Apply  to  Its  Payment 
Proceeds  of  Check  Presented  for  Payment  by  Maker. 

If  a  bank  holds  a  demand  note  and  the  maker  presents  for  payment  a 
check  payable  to  himself,  can  the  bank  call  the  loan  and  apply  the  pro- 
ceeds of  the  check  to  its  payment? 

I  think  the  bank  would  have  the  right  to  call  a  demand  loan  at 
any  time,  and  if  the  maker  presented  a  check  payable  to  himself 
the  bank  could  call  the  loan  and  insist  on  applying  the  check  on 
the  debt.  If  the  bank  demanded  payment  of  the  note  and  at  the 
same  time  held  on  to  the  money  due  on  the  check  and  applied  it 
to  the  payment  of  the  note,  the  maker  would  have  a  very  hard 
time  forcing  it  to  pay  him  the  money.  Of  course  this  method  of 
collection  is  a  very  unusual  and  harsh  one  and  should  not  be  re- 
sorted to  unless  it  is  absolutely  necessary  to  collect  the  money. 


Bank  May  Set  Off  Deposit  Against  Series  of  Notes  Purchased 
as  They  Mature. 

Has  a  bank  the  right  to  charge  to.a  depositor's  account  at  the  maturity 
thereof,  respectively,  a  series  of  notes  given  by  the  depositor  to  a  third 
person  and  purchased  by  it  from  such  third  person  for  value  and  before 
maturity  ? 

A  deposit  in  a  bank  creates  the  relation  of  debtor  and  creditor. 
The  bank  owes  the  depositor  the  amount  of  the  deposit,  which 
it  agrees  to  pay  to  him  or  his  order  on  demand.  The  right  to 
offset  mutual  accounts  is  universally  recognized.  So  a  bank,  as 
has  been  frequently  held,  has  the  right  to  charge  to  the  account 
of  the  depositor  at  maturity  any  obligation  of  his  in  favor  of  the 
bank.  The  fact  that  the  depositor's  notes  in  the  present  instance 
were  given  to  a  third  party  makes  no  difference.  They  are  still 
the  obligations  of  the  maker  of  the  notes,  who  is  also  the  de- 
positor. The  situation,  therefore,  is  that  the  bank  owes  the  de- 
positor the  amount  of  his  deposit.  The  depositor  owes  the  bank 


PARK'S  BANKING  LAW  of  GEORGIA., 

the  amount  of  the  notes  as  they  respectively  mature.  The  bank 
has  a  perfect  right  to  offset  the  amount  due  by  it  against  the 
amount  due  to  it.  The  depositor's  direction  not  to  charge  the 
notes  to  his  account  could  not  affect  the  right  of  the  bank  to  do  so. 


Bank  May  Set  Off  Deposit  Against  Note  of  Bankrupt 
Depositor. 

Has  a  bank  the  right  to  offset  a  deposit  against  a  past  due  note  of  its 
customer  without  his  consent,  where  the  customer  files  a  voluntary  peti- 
tion in  bankruptcy  and  schedules  the  deposit  as  an  asset  and  the  note  as  a 
liability? 

The  Bankruptcy  Act  expressly  authorizes  the  set  off  of  mutual 
accounts..  This  has  been  repeatedly  held  to  include  deposits  in 
bank  as  against  notes  of  the  depositor.  There  are  numerous 
decisions  to  this  effect  by  the  bankruptcy  courts,  including  the 
Supreme  Court  of  the  United  States,  which,  of  course,  is  the 
final  authority.  Probably  the  leading  case  is  that  of  the  Conti- 
nental &  Commercial  Trust  &  Savings  Bank  v.  Chicago  Title  & 
Trust  Company,  229  U.  S.  434,  57  L.  Ed.  1268,  where  the  ques- 
tion was  expressly  ruled. 


Bank  May  Set  Off  Deposit  Against  Matured  Note  of 
Deceased  Depositor. 

One  who  has  money  on  deposit  executes  a  note  with  personal  indorse- 
ment which  contains  a  clause  authorizing  the  bank  at  maturity  of  the  note 
to  charge  off  to  the  satisfaction  of  the  note  any  funds  on  deposit  to  his 
credit  The  maker  dies  before  the  note  matures.  Has  the  bank  the  right, 
under  the  authority  contained  in  the  .note,  to  charge  off  from  the  maker's 
general  deposit,  a  sum  sufficient  to  satisfy  the  note? 

The  power  contained  in  the  note  is  a  power  coupled  with  an 
interest  and,  under  §  3575  of  Park's  Ann.  Code,  the  death  of 
the  maker  would  not  revoke  the  power.  But,  independently  of 
the  question  of  the  power  given  to  the  bank  to  charge  the  amount 
to  the  depositor's  account,  a  bank  always  has  the  right  to  offset 
the  amount  due  by  it  to  a  depositor  with  any  debt  due  by  the 
depositor  to  it.  The  deposit  in  the  bank  creates  the  relation  of 
debtor  and  creditor  between  the  bank  and  the  depositor,  and 
there  can  be  no  question  as  to  the  right  to  set  off  mutual 
debts.  This  is  allowed  in  case  of  the  bankruptcy  of  a  depositor, 
and  the  principle  would  hold  good  in  case  of  the'  death  of  a  de- 
positor, provided,  of  course,  the  note  has  matured. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  439 

Bank  Cannot  Offset  Deposit  Against  Note  of  Deceased  De- 
positor Before  Maturity  of  Note,  Unless  Estate  Insolvent. 

May  a  bank  set  off  against  a  note  owed  it  by  a  depositor,  upon  the  death 
of  the  depositor,  the  balance  to  the  credit  of  such  depositor  in  advance  of 
the  maturity  of  the  note? 

The  right  of  a  bank  to  set  off  funds  on  deposit  as  against  a  note 
due  it  is  thoroughly  recognized.  It  has  been  so  held  by  more  than 
one  decision  of  our  Supreme  Court.  But  while  this  is  true,  the 
right  of  set-off  ordinarily  does  not  exist  until  the  note  becomes 
due.  As  stated  by  Michie,  "The  general  rule  is,  that  a  bank 
cannot  apply  a  general  deposit  to  an  unmatured  indebtedness  of 
the  depositor."  2  Michie  on  Banks  and  Banking,  p.  1028. 

Michie  also  says :  "The  death  of  a  depositor  does  not  deprive 
the  bank  of  its  right  to  apply  his  deposit  to  the  payment  of  his  in- 
debtedness." 2  Michie  on  Banks  and  Ranking,  p.  1017. 

Under  our  Code,  while  set-off  is  not  generally  allowed  until  a 
debt  becomes  due,  it  is  allowable  in  case  of  insolvency  or  where 
the  debtor  is  a  nonresident,  the  language  of  the  Code  being :  "If 
a  plaintiff  resides  without  this  State,  or  is  insolvent,  the  defendant 
may  set  off  against  him  a  debt  not  due,  under  such  equitable  terms 
as  may  be  prescribed  by  the  court."  Park's  Ann.  Code,  §  4349. 

Whether  or  not  in  the  case  of  the  death  of  a  depositor,  his 
estate  being  solvent,  the  bank  is  allowed  to  set  off  a  deposit,  seems 
not  to  have  been  decided  in  Georgia.  The  decisions  in  other 
States  are  not  uniform.  Even  in  case  of  insolvency,  a  number 
of  the  courts  hold  that  the  right  of  set-off  does  not  exist  until  the 
maturity  of  the  paper.  Other  courts  hold  that  where  the  estate 
of  the  depositor  is  insolvent  or  there  is  danger  of  insolvency,  the 
bank  is  authorized  to  apply  the  deposit  in  satisfaction  of  the 
note.  But  this  seems  to  be  as  far  as  the  courts  have  gone. 

In  the  absence  of  insolvency  or  other  special  circumstances,  I 
do  not  think  a  bank  would  have  the  right  to  offset  a  deposit 
against  a  note  which  had  not  matured,  or  that  the  death  of  the 
depositor  without  more  would  give  it  such  right. 


Value  of  Clause  in  Note  Giving  Bank  Right  to  Set  Off  Deposit 
Before  Maturity. 

What  is  the  value  of  a  clause  in  a  note  which  authorizes  the  bank  at  its 
option  at  any  time  to  apply  to  the  payment  of  the  note  any  money  on  de- 
posit, whether  the  note  is  due  or  not? 

I  think  this  is  a  good  provision  and  is  enforceable.  It  some- 
times enables  a  bank  to  protect  itself  where  it  has  reason  to  sus- 


440  PARK'S  BANKING  LAW  OF  GEORGIA. 

pect  that  a  party  whose  note  it  holds  is  getting  in  bad  circum- 
stances but  who  has  not  gone  into  "bankruptcy  or  become  in- 
solvent. Without  this  provision,  in  the  event  of  insolvency  the 
bank  would  have  the  right,  whether  the  note  was  due  or  not,  to 
apply  the  deposit  to  the  payment  of  the  note,  and  it  would  have 
the  right,  regardless  of  insolvency,  to  apply  the  deposit  when  the 
note  became  due.  There  are  some  cases,  however,  where  a  bank 
would  like  to  make  the  application,  although  the  note  was  not  due 
and  the  party  was  not  then  insolvent.  In  such  instances,  though, 
of  course,  they  are  rare,  the  clause  would  be  of  considerable 
value. 


Bank  Ordinarily  Has  No  Right  to  Charge  Note  to  Account 
of  Indorser  or  Guarantor. 

Has  a  bank  the  right  to  apply  to  the  payment  of  a  note  the  balance 
to  the  credit  of  a  depositor  who  is  an  indorser  on  the  note? 

In  the  absence  of  a  contract  authorizing  the  bank  to  make  such 
application  of  the  deposit,  I  do  not  think  under  ordinary  cir- 
cumstances it  would  be  allowed  to  hold  the  deposit  and  apply  it 
to  the  payment  of  the  note.  The  rule  is  thus  stated  in  Michie  on 
Banks  and  Banking,  p.  1031 : 

"In  absence  of  a  contract  a  bank  has  no  right,  without  a  de- 
positor's consent,  to  apply  his  deposit  to  the  payment  of  an  obliga- 
tion for  which  he  is  liable  as  a  guarantor,  indorser,  or  surety,  as, 
for  instance,  a  bill  of  exchange  indorsed  by  such  depositor  and 
discounted  by  the  bank ;  a  check  of  a  third  person  guaranteed  by 
him ;  or  a  note,  payment  of  which  he  has  guaranteed,  or  on  which 
he  is  liable  as  indorser  or  surety.  The  right  may  exist,  under  cer- 
tain circumstances,  even  where  the  depositor  is  not  primarily 
liable  on  the  notes,  as  where  the  makers  of  the  notes  are  insolvent 
and  it  appears  that  it  was  the  intention  of  the  party  that  their 
claims  should  be  mutual  credits." 

The  author's  statement  is  well  supported  by  the  decided  cases, 
and  is  undoubtedly  the  general  rule. 


Failure  of  Bank  to  Set  Off  Deposit  Against  Note  of  Maker 
Does  Not  Discharge  Surety  or  Indorser. 

Is  it  the  duty  of  a  bank  for  the  protection  of  a  surety  or  indorser  to 
credit  on  a  note  at  maturity  the  amount  of  the  deposit  of  the  principal  or 
maker,  such  amount  being  insufficient  to  pay  the  note  in  full? 

In  the  case  of  Davenport  v.  State  Banking  Co.,  126  Ga.  136,  the 
Supreme  Court  holds  that  while  a  bank  has  a  right  when  it  has 


OPINIONS  OF  THE  GENERAL  COUNSEL.  441 

on  deposit  funds  sufficient  to  pay  a  note  in  full  to  charge  the 
note  to  the  account  of  the  depositor,  it  is  not  obliged  to  do  so  for 
the  protection  of  an  indorser,  and  its  failure  to  charge  the  note 
and  permitting  the  deposit  to  be  checked  out  will  not  relieve  the 
indorser. 

In  discussing  the  question  whether  the  bank  should  apply  funds 
as  a  credit  on  the  note  when  the  deposit  is  not  sufficient  to  pay  it 
in  full,  the  court  says  : 

"Jt  has  been  held  by  almost  all  the  courts  where  the  questions 
have  arisen  that  if  at  the  maturity  of  a  note  held  by  a  bank  the 
principal  thereon  has  not  sufficient  funds  on  general  deposit  with 
the  bank  to  pay  it,  the  bank  is  under  no  duty  to  a  surety  upon  the 
note  to  apply  such  funds  of  the  principal  as  may  then  be  on  de- 
posit to  the  payment  of  the  note  pro  tanto,  nor  is  it  bound  to 
pay  the  note  from  subsequent  deposits  of  the  principal,  although 
they  are  sufficient  for  this  purpose." 


The  Authorities  Are  in  Conflict  as  to  the  Right  of  a  Bank  to 
Charge  to  Depositor's  Account  a  Note  Made  Payable  at 
the  Bank. 

Can  a  bank  pay  a  note  from  the  general  deposit  of  the  maker  without 
specific  direction  from  the  maker  to  pay  it,  the  note  on  its  face  being  pay- 
able at  the  bank? 

There  seems  to  be  a  hopeless  conflict  in- the  decisions  of  the 
different  courts  on  this  question.  The  courts  of  Georgia,  so  far 
as  I  have  been  able  to  ascertain,  have  never  passed  upon  it  one 
way  or  the  other. 

I  quote  from  Michie  on  Banks  and  Banking: 

"In  some  jurisdictions  it  has  been  held  that  where  one  makes 
a  note  payable  by  its  terms  at  a  bank  at  which  he  is  a  general 
depositor,  the  bank  is  thereby  authorized  to  pay  it,  on  presenta- 
tion when  due,  out  of  any  funds  of  the  maker  then  on  general 
deposit  with  it,  and  is  entitled  to  a  proper  credit  in  the  account  of 
the  depositor,  and  may  hold  the  note  as  the  equitable  owner  or 
purchaser,  and  set  it  off  in  a  suit  to  recover  a  balance  due  the 
depositor  on  a  general  account.  But  in  other  jurisdictions  it  has 
been  held  that  a  note  executed  by  a  depositor,  payable  at  the 
bank,  is  not  equivalent  to  a  check,  and  that  the  bank  has  no  au- 
thority to  pay  such  note  to  a  third  party  in  the  absence  of  a  usage 
or  of  instructions  from  the  maker  to  that  effect;  and  that  a 
usage  to  authorize  such  payment  out  of  deposits  of  the  maker  at 
the  bank  must  be  general,  uniform  and  certain,  and  known  to  both 
parties.  But  a  depositor's  parol  direction  to  apply  his  deposit  in 
payment  of  a  note  payable  at  the  bank  is  sufficient  to  authorize 


442  PARK'S  BANKING  LAW  OF  GEORGIA. 

such  application.  In  jurisdictions  where  it  is  held  that  a  bank  is 
authorized  to  pay  a  note  payable  at  the  bank  out  of  the  funds  of 
the.,  maker  on  general  deposit  with  it,  the  burden  of  proof  is  on 
the  bank  to  show  that  the  note  was  payable  at  the  bank,  in  an  ac- 
tion by  the  maker  for  the  conversion  of  a  portion  of  his  deposit 
by  paying  such  note  without  his  special  authority."  2  Michie  on 
Banks  and  Banking,  §  144,  p.  1168. 

This  quotation  embodies  a  fair  statement  of  the  rulings  of  the 
different  courts.  It  will  be  seen  that  the  courts  are  in  direct  con- 
flict. The  courts  of  Indiana,  Ohio,  New  York,  and  Pennsylvania 
hold  that  a  bank  at  which  a  note  is  payable  can  apply  the  funds 
of  the  maker  held  on  deposit  to  the  payment  of  his  note.  The 
contrary  is  held  by  the  courts  of  Tennessee,  Illinois,  Massachu- 
setts, and  Louisiana. 

Perhaps  the  leading  cases  upholding  the  bank's  right  to  pay  a 
note  is  a  decision  by  the  Supreme  Court  of  Indiana.  I  quote : 

"A  bank  which  in  good  faith  pays  a  note,  made  by  one  of  its 
depositors,  payable  at  its  place  of  business  and  against  which 
there  is  no  defense,  may  set  off  the  amount  so  paid  against  the 
balance  due  on  the  maker's  account,  although  the  payment  was 
made  without  notice  to,  or  express  authority  from,  him."  Bed- 
ford Bank  v.  Acoam,  125  Ind.  584,  25  N.  E.  713,  9  L.  R.  A. 
560,  21  Am.  St.  Rep.  258. 

The  court  calls  attention  in  this  case  to  the  fact  that  when 
money  is  deposited  the  relation  of  debtor  and  creditor  exists  be- 
tween the  bank  and  the  depositor,  and  that  the  bank  has  the  right 
to  apply  a  sufficient  amount  of  the  deposit  to  the  payment  of  any 
debt  due  by  the  depositor  to  the  bank.  It  is  said  that  if  the  bank 
had  discounted  the  note  or  taken  an  assignment  of  it  there  would 
be  no  dispute  as  to  its  right  to  retain  the  amount  due  out  of  the 
depositor's  account,  and  an  analogy  is  drawn  between  a  case  of 
that  kind  and  a  case  where  the  bank  pays  the  note,  which  on  its 
face  is  payable  at  the  bank.  As  a  further  reason,  the  court  says 
that  one  who  has  drawn  a  note  payable  at  a  bank  must  have  done 
so  for  some  purpose,  and  that  he  can  not  be  heard  to  say  after 
the  bank  has  paid  a  just  debt  for  which  he  had  given  his  note, 
as  to  which  he  claims  no  defense,  that  the  payment  was  wholly 
voluntary  and  unauthorized. 

Perhaps  the  leading  case  on  the  other  side  of  the  proposition  is 
from  the  Supreme  Court  of  Tennessee.  In  an  exceedingly  vigor- 
ous and  clear-cut  opinion,  this  court  denies  that  the  bank  has  any 
right  to  pay  the  note  of  a  depositor  out  of  his  general  deposit. 
The  court  says : 


OPINIONS  of  THE  GENERAL  COUNSEL.  443 

"A  bank  has  no  implied  authority  to  pay  to  a  third  party  a  note 
made  by  a  depositor  payable  at  its  place  of  business  simply  be- 
cause he  has  funds  there  sufficient  for  that  purpose,  in  the  ab- 
sence of  any  course  of  dealing  or  previous  instructions  so  to  apply 
the  deposits."  Grissom  v.  Com.  Nat.  Bank,  87  Tenn.  350,  10  S. 
W.  774,  3  L.  R.  A.  273,  10  Am.  St.  Rep.  669. 

The  court  argues  that  the  relation  of  debtor  and  creditor  is 
created  by  a  general  deposit,  and  that  the  depositor  has  only  a 
debt  against  the  bank,  payable  on  demand,  upon  the  presentation 
of  an  order  addressed  to  the  bank  in  unequivocal  terms  asking  it 
to  pay  a  certain  amount  to  some  person  therein  named  or  to 
bearer. 

It  is  said  also  that  where  an  agent  receives  money  for  his 
principal  he  can  not  make  an  application  of  such  money  to  the 
payment  of  his  principal's  debt  without  the  express  or  implied 
assent  of  the  principal. 

The  court  says  that  the  words  "payable  at"  are  not  synonymous 
with  the  words  "by  or  through,"  and  that  the  words  "payable  at 
the  bank"  are  not  a  necessary  part  of  the  instrument,  but  that  a 
note  is  as  valid  when  made  payable  generally  as  when  made  pay- 
able at  any  particular  place.  These  words,  it  is  said,  simply  desig- 
nate for  convenience  a  place  of  payment. 

In  this  case  a  distinction  is  drawn  between  a  check  and  a  note. 
It  is  pointed  out  that  a  check  is  a  written  order  asking  a  bank  to 
pay  a  certain  sum  of  money,  while  a  note  is  a  promise  to  pay 
another  a  certain  sum  of  money  at  a  certain  time;  that  one  is 
payable  on  presentation,  the  other  on  a  day  certain ;  that  one  is  an 
appropriation  of  money  in  a  banker's  hands,  the  other  is  a  promise 
to  pay;  and  that  on  the  check  ordinarily  no  right  of  action  ac- 
crues until  after  presentment  for  payment,  while  on  the  note  a 
right  of  action  against  the  maker  exists  without  such  presentment. 

This  case,  however,  holds  that  a  bank  might  so  pay  a  note  if 
there  was  a  certain  and  uniform  custom  among  the  banks  at  a 
certain  place  so  to  pay.  This  is  a  very  strongly  reasoned  case, 
and  I  am  inclined  to  think  states  the  true  law  on  the  question. 

The  text  writers  on  the  subjects  of  banks  and  banking  and  of 
negotiable  instruments  note  the  fact  that  there  is  a  conflict  of  au- 
thority on  this  subject.  Most  of  them  seem  to  think  that  the 
weight  of  authority  is  in  support  of  the  view  that  a  bank  can  pay 
a  note  out  of  a  general  deposit.  The  Tennessee  court,  however, 
in  the  opinion  above  referred  to,  undertakes  to  prove  that  the 
weight  of  authority  is  against  the  bank's  right  to  pay. 


444  PARK'S  BANKING  LAW  OF  GEORGIA. 

Depositor  May  Set  Off  His  Deposit  with  An  Insolvent  Bank 
Against  His  Note  Held  by  That  Bank. 

Can  a  person  who  owes  a  note  to  a  bank  at  the  time  it  becomes  insolvent 
set  off,  as  against  such  note,  money  which  is  on  deposit  to  his  credit  in 
the  bank? 

There  is  no  doubt  that  a  deposit  can  be  set  off  against  a  note 
owed  by  the  depositor  to  the  bank.  The  general  rule  on  the  sub- 
ject is  thus  stated  in  Michie  on  Banks  and  Banking,  p.  1059 : 

"Where  a  depositor  is  indebted  to  a  bank,  he  can  set  off  his 
deposit  against  a  debt  due  from  him  to  the  bank  in  the  same  right 
or  capacity,  on  the  principle  that  mutual  claims  which  are  between 
creditor  and  debtor  may  be  set  off  against  each  other." 

I  also  quote  from  the  case  of  Scott  v.  Armstrong,  146  U.  S. 
499,  36  L.  Ed.  1059: 

"Where  a  national  bank  becomes  insolvent  and  its  assets  pass 
into  the  hands  of  a  receiver  appointed  by  the  Comptroller  of  the 
Currency  a  debtor  of  the  bank  can  set  off  against  his  indebtedness 
the  amount  of  a  claim  he  holds  against  the  bank,  if  the  debt  due 
from  the  bank  was  payable  at  the  time  of  its  suspension,  but  that 
due  to  it  was  payable  at  a  time  subsequent  thereto." 


Demand  Deposits  and  Time  Deposits  Can  Be  Used  Alike  in 
Payment  of  Notes  Due  Insolvent  Bank. 

Do  demand  deposits  in  an  insolvent  bank  have  priority  of  payment  over 
time  certificates,  and  can  they  be  used  in  payment  of  notes  due  the  in- 
solvent bank? 

The  Supreme  Court  in  the  case  of  Lamar  v.  Taylor,  141  Ga. 
228,  held  that  the  holders  of  time  certificates  were  depositors  and 
entitled  to  rank  as  such,  there  being  no  difference  as  to  priority 
between  demand  and  time  deposits. 

Demand  deposits  as  well  as  time  certificates  can  be  set  off 
against  notes. 

NOTE.— The  Banking  Act,  §  2,  provides  that  the  term  "depositor  means 
any  person  who  shall  deposit  money  or  commercial  paper  in  any  bank, 
either  on  open  account,  subject  to  check,  or  to  be  withdrawn  otherwise 
than  by  check,  whether  interest  is  allowed  thereon  or  not,  and  shall  include 
holders  of  demand  and  time  certificates  of  deposit  lawfully  issued." 


OPINIONS  OF  THE  GENERAL  COUNSEL.  445 

Executor  or  Administrator  Cannot  Set  Off  Deposit  in  His 
Own  Name  Against  Debt  Due  by  Estate. 

Can  an  executor  or  administrator  set  off  a  deposit  in  his  own  name  as 
an  individual  against  a  note  which  the  estate  he  represents  owes  the  bank? 
Or  can  he  set  off  against  a  debt  owed  by  him  individually  to  the  bank  a 
deposit  made  by  him  as  executor  or  administrator? 

"Set  off  must  be  between  the  same  parties  and  in  their  own 
right."  Park's  Ann.  Code,  §  4341.  Therefore,  an  executor  or  ad- 
ministrator is  not  entitled  to  set  off  against  his  liability  as  such 
executor  or  administrator  a  debt  from  the  bank  to  him  as  an  in- 
dividual ;  nor  can  he  set  off  against  a  debt  which  he  owes  indi- 
vidually an  indebtedness  of  the  bank  to  himself  in  his  capacity 
as  representative  of  the  estate.  The  rule  is  clearly  stated  in 
Morse  on  Banks  and  Banking,  §  334,  as  follows  :  "The  debts 
must  be  between  the  same  parties  and  in  the  same  right.  A  de- 
posit due  to  A  as  executor,  cannot  be  offset  against  A's  personal 
debt,  nor  vice  versa." 


A  Member  of  a  Partnership  Cannot  Set  Off  Against  His  Note, 
a  Deposit  in  Name  of  the  Firm. 

A  member  of  a  partnership  is  indebted  to  a  bank  on  his  individual  note. 
When  sued  on  this  note  can  he  set  off  a  deposit  in  the  bank  in  the  name 
of  the  firm  of  which  he  is  a  member? 

This  question  is  controlled  by  the  decision  of  the  Supreme 
Court  of  Georgia  in  the  case  of  Bishop  v.  Mathews,  109  Ga.  790. 
I  quote  the  headnote : 

"A  defendant  in  an  action  brought  against  him  individually 
upon  a  demand  for  the  payment  of  which  he  is  individually  liable, 
cannot,  without  showing  some  equitable  reason  for  being  allowed 
to  do  so,  set  off  against  the  plaintiff's  claim  a  debt  due  by  the 
latter  to  a  partnership  of  which  the  defendant  is  or  had  been  a 
member." 

This  seems  to  be  the  general  rule  on  the  subject.  It  is  thus 
stated  in  Michie  on  Banks  and  Banking,  p.  1066: 

"As  a  general  rule  a  partnership  deposit  cannot  be  set  off 
against  the  debts  of  individual  members  of  the  partnership  owed  to 
the  bank,  unless  there  be  some  special  equity  or  equities  to  justify  it. 
Such  special  equities  may  arise  under  circumstances  of  fraud ;  or 
where  there  are  a  series  of  transactions  in  which  joint  credit  is 
given  with  reference  to  the  special  debt;  or  where  the  mode  or 
course  of  dealing  is  such  as  to  furnish  a  presumption  that  there 
was  an  agreement  that  the  mutual  dealings  on  each  side,  and  in- 


446  PARK'S  BANKING  LAW  OF  GEORGIA. 

dependent  debts,  were  to  be  set  off  against  each  other,  and 
that,  without  such  right  of  retaining  against  each  other,  the 
parties  would  not  have  continued  dealing  with  each  other." 


A  Deposit  in  a  Bank  Can  Be  Set  Off  by  a  Stockholder  Against 
An  Unpaid  Stock  Subscription  Unless  the  Bank  Is  In- 
solvent. 

Can  a  stockholder  in  a  bank  use  a  deposit  to  his  credit  in  payment  of 
an  unpaid  balance  on  a  subscription  to  the  stock  of  the  bank? 

Under  the  Code : 

"Between  the  parties  themselves  any  mutual  demands  existing 
at  the  time  of  the  commencement  of  the  suit  may  be  set  off. 
Set  off  must  be  between,  the  same  parties  and  in  their  own  right." 
Park's  Ann.  Code,  §§  4340,  4341. 

A  deposit  in  a  bank  creates  the  relation  of  debtor  and  creditor 
between  the  bank  and  the  depositor.  The  bank  owes  the  depositor 
the  amount  which  it  has  received  from  him  and  which  it  under- 
takes to  pay  on  demand.  By  subscribing  to  the  stock  of  a  bank 
the  subscriber  becomes  liable  to  pay  to  the  bank  the  amount  of 
his  subscription.  The  question  presents  a  case  of  mutual  de- 
mands existing  between  the  parties  in  the  same  right ;  and,  under 
the  Code,  one  could  be  offset  against  the  other. 

But  when  the  bank  is  insolvent  and  the  unpaid  subscriptions 
are  being  enforced  in  equity  for  the  benefit  of  creditors  such  an 
offset  is  not  permitted.  In  the  first,  case,  the  obligations  are  mu- 
tual and  can,  therefore  be  set  off.  In  the  second  case,  the  courts 
hold  that  the  obligations  are  not  mutual  and  that  set-off  is  not 
allowed.  I  quote  from  a  decision  by  the  Supreme  Court : 

"Shareholders  of  an  insolvent  corporation  who  are  indebted  to 
it  upon  unpaid  stock  subscriptions  and  who  are  also  its  creditors 
can  not,  in  defense  to  an  equitable  proceeding  brought  by  another 
creditor  in  behalf  of  himself  and  all  the  creditors  of  the  corpora- 
tion to  wind  up  its  affairs  and,  as  an  incident  thereto,  subject 
these  shareholders  to  liability  upon  such  stock  subscriptions,  set 
off  against  the  amounts  due  thereon  the  debts  due  to  them  by  the 
corporation.  In  such  a  case,  'they  must  pay  up  what  they  owe 
like  other  debtors,  and  then  get  their  dividends  like  other  credit- 
ors' when  the  court  distributes  the  assets  among  those  entitled  to 
the  same."  Wilkinson  v.  Bertock,  111  Ga.  187. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  447 

A  Deposit  Cannot  Be  Set  Off  Against  an  Assessment  for  the 
Statutory  Liability  of  a  Stockholder. 

Where  a  bank  has  failed  and  it  is  necessary  to  collect  the  full  assessment 
from  the  stockholders,  can  a  stockholder  who  was  also  a  depositor  set  off 
his  deposit  against  his  assessment,  the  bank  not  being  able  to  pay  its  de- 
positors in  full  even  after  collecting  the  hundred  per  cent  assessment? 

A  stockholder,  who  is  also  a  depositor,  cannot  set  off  the 
amount  of  his  deposit  against  the  assessment  levied  on  him  by 
reason  of  his  individual  liability  as  a  stockholder  in  the  bank, 
where  the  amount  to  be  realized  from  the  assessment  upon  the 
stockholders  will  not  pay  in  full  all  the  depositors. 

The  rule  is  thus  stated  in  Morse  on  Banks  and  Banking,  Vol. 
2,  p.  410: 

"Where  one  is  a  creditor  as  well  as  a  stockholder,  he  cannot 
avail  himself  of  the  debt  owing  to  him  by  the  bank  by  way  of 
set-off  to  diminish  his  contributory  share.  His  liability  as  a 
contributor  for  the  benefit  of  creditors  must  be  distinguished 
from  his  character  as  a  simple  contract  debtor  to  the  bank  upon 
ordinary  business  transactions." 


STOCK. 


Definition  of  Prefered,  Common,  and  Watered  Stock. 

What  is  the  difference  between  preferred  stock  and  common  stock? 
What  is  the  meaning  of  watered  stock? 

Without  undertaking  to  give  an  accurate  technical  definition, 
preferred  stock  differs  from  common  stock  in  that  it  is  entitled 
to  preference  in  dividends  over  common  stock,  and  sometimes 
also  to  preference  on  the  final  distribution  of  the  corporation's 
assets.  A  corporation  sometimes  issues  preferred  stock  as  a 
means  of  borrowing  money,  though  holders  of  preferred  stock 
are  stockholders  rather  than  creditors.  The  holders  of  this  stock 
are  generally  entitled  to  be  paid  dividends  of  some  fixed  amount 
before  any  dividends  are  declared  on  the  common  stock,  and 
sometimes  it  is  provided  that  in  the  event  dividends  are  not  de- 
clared in  any  one  year  they  shall  be  cumulative,  and  when  divi- 
dends are  declared  at  any  later  time  the  holders  of  the  preferred 
stock  are  entitled  to  be  paid  dividends  for  the  intervening  period 
until  they  have  received  the  regular  stated  dividend  for  each  year, 
before  any  dividends  are  declared  and  paid  to  common  stock- 
holders. 


448  PARK'S  BANKING  LAW  OF  GEORGIA. 

By  "watered  stock"  is  meant  stock  issued  without  correspond- 
ing value  being  paid  to  the  corporation.  For  instance,  one  com- 
mon method  of  financing  a  railroad  company  is  for  a  construction 
company  to  be  organized  for  the  purpose  of  building  the  road, 
the  wiork  to  be  paid  for  by  issuing  the  bonds  of  the  company  and 
so  much  of  the  stock  of  the  railroad  company.  This  stock  fre- 
quently represents  no  value  at  all,  the  road  being  really  paid  for 
by  the  sale  of  the  bonds.  Stock  issued  under  such  circumstances 
would  usually  be  regarded  as  watered  stock.  So  sometimes  a 
corporation  in  order  to  secure  money  will  issue  so  much  stock  as 
a  bonus  to  go  along  with  an  issue  of  bonds.  Sometimes  a  stock 
dividend  is  declared  by  a  corporation  when  its  surplus  and  profits 
are  not  sufficient  to  cover  the  stock  issued ;  such  excess  stock 
would  be  "watered."  The  term  has  no  fixed  definite  meaning,  but 
implies,  as  will  be  seen  from  the  illustrations,  simply  that  the 
stock  does  not  represent  actual  capital  paid  into  the  company. 


Pledgee  of  Stock  Is  Entitled  to  the  Dividends  Thereon. 

Stock  of  a  corporation  is  pledged,  the  corporation  being  notified  of  the 
fact,  but  the  name  of  the  pledgee  not  being  given,  is  the  pledgee  entitled 
to  the  dividends  on  the  stock  or  must  they  be  paid  to  the  pledgor? 

I  quote  from  a  decision  of  the  Supreme  Court  of  Georgia : 
"Where  stock  of  an  incorporated  company  is  pledged  by  the 
owner  as  collateral  security  for  the  payment  of  a  debt,  the  pledgee 
is,  as  a  general  rule,  entitled  to  collect  and  receive  the  dividends 
thereon,  unless  this  right  is  reserved  by  the  pledgor  at  the  time 
the  pledge  is  made. 

"If  the  company  by  which  the  stock  was  issued,  with  notice  of 
the  fact  that  the  pledge  has  been  made,  pays  the  dividends  to  the 
pledgor,  it  is  ordinarily  liable  to  the  pledgee  for  such  dividends, 
although  the  stock  has  not  been  actually  transferred  on  the  books 
of  the  company."  The  Guarantee  Co.  of  N.  A.  v.  East  Rome 
Town  Co.,  96  Ga.  511. 

I  do  not  think  it  would  make  any  difference  that  the  notice  did 
not  specify  to  whom  the  stock  had  been  hypothecated.  The  fact 
that  the  notice  is  given  would  make  the  corporation  liable  to  the 
pledgee  for  the  dividend,  and  it  would  pay  it  to  the  pledgor  of 
the  stock  at  its  own  risk. 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  449 

Administrator  or  Other  Fiduciary  May  Vote,  Either  in  Person 

or  by  Proxy. 

Can  an  executor  or  administrator  vote  stock  of  the  estate  of  which  he  is 
the  representative  at  meetings  of  the  stockholders  of  the  corporation? 
Can  a  guardian  vote  his  ward's  stock? 

The  executor  or  administrator  is  entitled  to  vote  the  stock, 
whether  it  has  been  transferred  and  stands  in  his  name  as  exe- 
cutor or  administrator,  or  still  stands  in  the  name  of  the  deceased. 
I  quote  from  Cook  on  Corporations,  §  612,  p.  1669: 

"An  administrator  or  executor  may  vote  on  the  stock  of  the  de- 
ceased stockholder,  even  though  such  stock  has  not  been  trans- 
ferred to  the  executor  or  administrator  on  the  books  of  the  com- 
pany." 

The  guardian  of  a  minor  can  vote  the  minor's  stock,  the  same 
rule  applying  as  in  the  case  of  the  executor.  The  general  rule  is 
that  any  trustee,  or  person  acting  in  a  fiduciary  capacity,  has  the 
right  to  vote  the  stock  whether  standing  in  the  name  of  the  trus- 
tee or  of  the  beneficiary.  And  as  administrators,  executors  and 
guardians  have  the  right  to  appoint  agents  or  attorneys  in  fact 
(Park's  Ann.  Code,  §  4004),  they  may  be  represented  and  vote  by 
proxy  as  well  as  in  person. 


Holder  of  Forged  Stock  Certificate  Acquires  No  Rights 
Against  Corporation. 

A  bank  holds  as  collateral  security  a  certificate  of  stock  of  another  bank 
which  is  believed  to  be  a  forgery,  but  upon  which  the  other  bank's  seal 
is  affixed.  What  right  has  the  first  bank  against  the  other  bank  if  the 
certificate  is  a  forgery? 

The  general  rule  is  that  no  one  acquires  any  rights  under  a 
forged  instrument.  It  is  an  absolute  nullity.  A  forged  instru- 
ment, no  matter  how  the  forgery  may  be  effected  or  how  perfect 
it  may  be,  is  ordinarily  void  even  in  the  hands  of  a  bona  fide 
holder. 

The  rule  as  to  certificates  of  stock  is  thus  stated  in  Cook  on 
Corporations,  6th  Ed.,  §  293 : 

"Where  a  certificate  of  stock  is  forged  by  persons  other  than 
the  corporate  officers,  the  corporation  is,  of  course,  not  liable 
thereon,  unless  it  has  recognized  such  certificate  in  some  way. 
But  where  the  forgery  was  by  a  corporate  officer  or  has  been 
recognized  in  some  way  by  the  corporation,  difficult  questions 
arise.  The  law  on  the  subject  is  somewhat  unsettled,  and  at 
present  each  case  seems  to  turn  -largely  on  the  facts  in  that 
29 


450  PARK'S  BANKING  LAW  OF  GEORGIA. 

case.  In  Massachusetts  the  rule  seems  to  be  that  the  corporation 
is  not  liable  if  forgery  enters  into  the  transaction.  In  England 
the  same  rule  seems  to  prevail,  and  in  New  York  the  oldest  de- 
cision is  to  the  effect  that  the  corporation  is  not  liable." 

The  fact  that  the  seal  of  the  corporation  has  been  attached  to 
the  certificate  by  some  one  not  authorized  would  not  make  the 
certificate  genuine  or  give  the  holder  any  rights  as  against  the  cor- 
poration. The  seal  is  no  more  than  the  signature  of  the  cor- 
poration, and  if  attached  by  one  having  no  authority  would  confer 
no  more  rights  than  if  the  name  of  the  corporation  was  signed  by 
someone  without  authority. 


Power  of  Attorney  Authorizing  Transfer  of  Stock  May  Be  in 

Blank. 

Can  a  bank  transfer  a  certificate  of  stock  to  a  named  person  where  the 
power  of  attorney  authorizing  the  transfer  is  signed  in  blank,  the  name 
of  the  transferee  not  being  entered? 

Yes.  It  is  not  at  all  unusual  for  powers  of  attorney  to  be 
signed  in  blank.  A  bank  is  authorized  to  transfer  stock  upon  a 
power  so  executed. 


Pledgee  of  Stock  Is  Entitled  to  Have  Same  Transferred  to 
Him  on  Books  of  Corporation. 

Can  one  holding  bank  stock  as  collateral  have  such  stock  transferred 
and  reissued  to  him  as  pledgee? 

The  pledgee  of  a  certificate  of  stock  has  the  right  to  have  the 
stock  transferred  to  him  on  the  books  of  the  bank  or  other  cor- 
poration, to  collect  the  dividends  declared  on  the  stock  and  vote 
the  same  at  all  meetings  of  stockholders,  and  to  exercise  all  other 
privileges  accorded  to  the  owner  of  the  stock.  It  is  not  usual  for 
the  pledgee  or  holder  of  stock  as  collateral  to  have  the  stock  issued 
to  him  specifically  as  pledgee,  though  this  is  done  in  some  cases. 
It  is  a  proper  method  of  indicating  his  true  relation  to  the  stock. 


OPINIONS  of  THE  GENERAL  COUNSEL.  451 

Transfer  of  Stock  Before  Judgment  Valid  as  Against  Judg- 
ment Even  Though  Not  Recorded  on  Books  of  Company. 

A  share  of  bank  stock  was  sold  under  execution  against  the  stockholder. 
The  original  certificate  had  been  transferred  prior  to  judgment  against 
the  stockholder,  but  there  had  been  no  transfer  on  the  books  of  the  bank. 
Can  the  bank  issue  a  new  certificate  to  the  purchaser  at  the  sheriff's  sale? 

The  bank  would  not  be  authorized  to  issue  a  new  certificate  of 
stock  to  the  purchaser  of  the  shares  at  the  sheriff's  sale  if  the 
original  certificate  was  transferred  prior  to  the  judgment  against 
the  stockholder,  although  the  transfer  had  not  been  made  upon 
the  books  of  the  bank.  "Except  as  against  the  claims  of  the  cor- 
poration a  transfer  of  stock  does  not  require  a  transfer  on  the 
books  of  the  company."  Park's  Ann.  Code,  §  2219.  And  it  has 
been  held  by  the  Supreme  Court  that,  where  neither  the  charter 
nor  the  by-laws  of  the  corporation  require  that  stock  be  transferred 
on  the  books  of  the  company  or  the  surrender  of  the  certificate 
and  the  issuance  of  a  new  one  to  the  assignee,  any  mode  or  form 
of  conveyance  sufficient  in  law  to  transfer  the  absolute  title  to  the 
assignee  entitles  such  assignee  to  all  the  rights  and  benefits  accru- 
ing to  the  assignor,  just  as  if  the  certificate  of  stock  stood  in  the 
assignee's  name.  Sylvania  &  Girard  R.  R.  Co.  v.  Hoge,  129  Ga. 
734. 

Under  this  decision  the  original  purchaser  of  this  stock  would 
be  the  stockholder  regardless  of  whether  the  stock  had  been  trans- 
ferred on  the  books  or  not,  and  the  sheriff's  sale  could  not  defeat 
his  rights.  It  is  true  that  the  purchaser  at  a  sheriff's  sale  has  the 
right,  ordinarily,  to  compel  the  corporation  to  transfer  to  him  the 
stock  purchased,  but  in  the  event  he  should  undertake  to  compel 
a  transfer,  a  complete  answer  would  be  that  the  stock  had  been 
transferred  before  the  judgment  was  obtained  and  that,  therefore, 
the  sheriff's  sale  was  void. 


Pledge  of  Stock  Is  Superior  to  Judgment  Against  Pledger 

Does  a  judgment  obtained  subsequently  to  the  transfer  of  stock  pledged 
as  collateral  take  precedence  over  such  transfer,  if  the  transfer  has  not 
been  entered  upon  the  books  of  the  corporation? 

It  does  not. 

"Except  as  against  the  claims  of  the  corporation,  a  transfer  of 
stock  does  not  require  a  transfer  on  the  books  of  the  company." 
Park's  Ann.  Code,  §  2219. 


452  PARK'S  BANKING  LAW  OF  GEORGIA. 

Indeed,  the  lien  of  a  judgment  does  not  attach  to  stock  in  a 
corporation  from  the  time  of  its  rendition,  but  only  from  the 
date  of  the  levy,  and  notice  to  the  corporation  and  the  defendant 
as  provided  by  §  6035  of  the  Code.  Quoting  from  the  Supreme 
Court : 

"Stock  in  a  corporation  is  a  chose  in  action.  In  the  absence  of 
a  statute  it  would  not  be  subject  to  levy  or  sale.  By  the  Act  of 
1822  (Cobb's  Digest  511,  512)  the  lien  of  the  judgment  against 
the  shareholder  attached  from  the  date  of  its  rendition,  but  had 
to  be  kept  alive  by  giving  notice  within  twenty  days  to  the  cor- 
poration. This  policy  is  reversed  by  the  Civil  Code,  §  5431  (§ 
6035).  The  lien  now  does  not  attach  to  the  stock  upon  the  ren- 
dition of  the  judgment,  but  only  after  notice  acting  as  a  sort  of 
garnishment  on  the  corporation,  or  withholding  the  lien  until  levy 
as  under  the  Civil  Code,  §  3125  (§  3701).  Until  this  notice  is 
received  the  statute  recognizes  that  the  company  may  make  trans- 
fers notwithstanding  the  existence  of  a  judgment  against  the 
shareholder.  The  quasi  negotiable  character  of  stock,  the  fact 
that  certificates  indorsed  in  blank  may  and  do  pass  from  hand  to 
hand,  and  the  necessity  of  preserving  the  rights  of  that  large 
body  of  the  public  who  buy  and  lend  on  the  faith  of  shares,  was 
no  doubt  the  reason  for  the  change  made  by  the  Code  in  the  Act 
of  1822."  Owens  v.  Atlanta  Trust  &  Bkg.  Co.,  122  Ga.  523. 


Transfer  of  Stock  of  Deceased  Nonresident  Can  Be  Made 
Only  on  Order  of  Executor  or  Administrator  After  Four 
Weeks'  Published  Notice. 

Would  a  bank  be  safe  in  transferring  stock  standing  in  name  of  deceased 
nonresident  to  party  claiming  to  be  only  heir,  where  it  is  agreed  by  all 
parties  having  knowledge  that  there  was  only  one  heir  and  such  heir 
makes  affidavit  that  decedent  left  no  debts? 

The  only  way  in  which  a  bank  can  be  safe  in  transferring  the 
stock  of  a  deceased  nonresident  is  upon  the  order  of  an  adminis- 
trator or  executor,  certified  copy  of  the  appointment  and  qualifica- 
tion of  such  executor  or  administrator  being  filed  with  the  bank, 
and  notice  being  given  once  a  week  for  four  weeks  in  the  news- 
paper in  which  sheriff's  sales  are  advertised  in  the  county  in 
which  the  bank  is  located,  of  the  intention  to  make  the  transfer 
as  provided  by  statute. 

In  the  case  inquired  about  the  stockholder  is  supposed  to  have 
left  only  one  heir  and  no  debts.  If  this  is  the  fact,  no  one  could 
complain  of  the  transfer  of  the  stock  to  this  heir,  but  if  the  trans- 
fer is  made  in  any  manner  except  in  accordance  with  the  statute, 


OPINIONS  OF  THE  GENERAL  COUNSEL.  453 

the  bank  takes  the  risk  of  doing  so.  Should  there  be  other  heirs, 
the  transfer  to  the  one  would  be  no  protection,  and  should  there 
be  creditors  the  bank  would  be  liable  to  them. 

The  whole  matter  is  regulated  by  §  4105,  Park's  Ann.  Code. 


STOCKHOLDERS. 


Bank  Is  Not  Required  to  Furnish  a  Stockholder  with  List  of 

Stockholders. 

Is  a  bank  required  to  furnish  to  one  of  its  stockholders  a  list  of  all  of 
its  stockholders? 

The  National  Bank  Act  provides : 

"The  president  and  cashier  of  every  national  banking  associa- 
tion shall  cause  to  be  kept  at  all  times  a  full  and  correct  list  of 
the  names  and  residences  of  all  the  shareholders  in  the  associa- 
tion, and  the  number  of  shares  held  by  each,  in  the  office  where  its 
business  is  transacted.  Such  list  shall  be  subject  to  the  inspection 
of  all  the  shareholders  and  creditors  of  the  association,  and  the 
officers  authorized  to  assess  taxes  under  State  authority,  during 
business  hours  of  each  day  in  which  business  may  be  legally 
transacted.  A  copy  of  such  list,  on  the  first  Monday  of  July  of 
each  year,  verified  by  the  oath  of  such  president  or  cashier,  shall 
be  transmitted  to  the  Comptroller  of  the  Currency."  U.  S.  Comp. 
Stat.,  §  9773;  U.  S.  Rev.  Stat.,  §  5210. 

Practically  identical  provisions  governing  State  banks  are  con- 
tained in  §  189  of  the  Banking  Act  of  1919,  except  that  the  copy 
of  the  list  is  transmitted  to  the  superintendent  of  banks.  While 
the  list  must  be  kept  and  is  subject  to  inspection  by  the  stockhold- 
ers, there  is  no  requirement  for  furnishing  the  list  to  a  stock- 
holder on  his  demand. 


Stockholder's  Liability  Is  Provable  Debt  Dischargeable  in 
Bankruptcy. 

Can  a  stockholder  of  a  failed  bank  avail  himself  of  the  National  Bank- 
ruptcy Act  to  escape  his  stock  liability,  or  is  this  assessment  on  the  shares 
of  stock  in  the  nature  of  a  trust  fund  and  not  dischargeable  in  bank- 
ruptcy? 

Section  17  of  the  Bankruptcy  Act  as  amended  provides  that  a 
discharge  in  bankruptcy  shall  release  a  bankrupt  from  all  of  his 
provable  debts,  except  such  as  are:  1.  Taxes;  2.  Liabilities  for 


454  PARK'S  BANKING  LAW  OF  GEORGIA. 

obtaining  property  by  false  pretenses,  and  similar  cases ;  3.  Debts 
not  scheduled ;  or  4.  "Where  created  by  his  fraud,  embezzlement, 
misappropriation  or  defalcation  while  acting  as  an  officer  or  in 
any  fiduciary  capacity." 

It  will  readily  be  seen  that  the  stockholder's  liability  is  not 
comprehended  within  any  of  the  excepted  classes.  When  the 
liability  becomes  fixed,  it  is  a  provable  debt,  and  one  which  would 
be  discharged  in  bankruptcy.  This  has  been  decided  in  the  case  of 
Dight  v.  Chapman  (D.  C.  Oregon),  12  Am.  B.  R.  743,  holding 
that  a  judgment  against  a  stockholder  for  the  amount  of  his  lia- 
bility "is  a  provable  debt  within  the  meaning  of  the  Bankruptcy 
Act  and  is  released  by  his  discharge." 


Bank  Is  Liable  as  a  Stockholder  Where  Stock  Is  Transferred 
to  It  on  the  Books  of  the  Corporation,  Though  as  Col- 
lateral Security  Only.  ' 

Is  a  bank  to  which  stock  in  another  bank  is  transferred  as  collateral, 
the  stock  being  issued  in  the  name  of  the  bank,  liable  as  a  stockholder  in 
the  event  of  the  failure  of  the  bank  whose  stock  it  holds  ? 

A  bank  holding  stock  in  another  bank  is  liable  just  as  any  other 
stockholder  would  be. 

"Where  the  charter  of  a  bank  imposes  on  all  of  its  stockholders 
personal  liability  to  its  creditors,  such  liability  attaches  as  well  to 
those  who  acquire  a  complete  legal  title  to  stock  of  the  bank  by 
having  the  same  transferred  to  them  as  collateral  security  for 
debts  due  by  the  transf  errers  as  to  those  who  purchase  such  stock 
outright."  Chatham  Bank  v.  Brobston,  99  Ga.  801  (2). 

Nor  would  the  fact  that  the  bank  is  a  national  bank  make  any 
difference.  While  it  is  true  that  a  national  bank  may  not  acquire 
the  stock  of  another  as  an  investment,  and  that  it  may^set  up  the 
illegality  of  such  acquisition  when  sought  to  be  held  liable  for 
an  assessment  on  such  stock,  yet  the  rule  is  otherwise  where  the 
acquisition  of  the  stock  results  from  a  pledge  or  is  in  satisfaction 
of  a  debt.  This  has  been  settled  by  the  decision  of  the  Supreme 
Court  of  the  United  States  in  the  case  of  the  Germania  National 
Bank  v.  Case,  99  U.  S.  628,  25  L.  Ed.  448.  In  that  case  the 
Germania  National  Bank  held  as  collateral  certain  stock  in  the 
Crescent  City  Bank,  which  subsequently  failed.  The  Supreme 
Court  held  that  the  Germania  Bank  was  liable  as  a  stockholder.  I 
quote  from  that  case : 


OPINIONS  of  THE  GENERAL  COUNSEL.  455 

"It  is  thoroughly  established  that  one  to  whom  stock  has  been 
transferred  in  pledge  or  as  collateral  security  for  money  loaned, 
and  who  appears  on  the  books  of  the  corporation  as  the  owner  of 
the  stock,  is  liable  as  a  stockholder  for  the  benefit  of  creditors." 

This  was  held  notwithstanding  the  fact  that  the  Germania 
Bank  had  transferred  the  stock  of  the  Crescent  City  Bank  which 
it  held  as  collateral  to  a  clerk  in  the  Germania  Bank,  the  transfer 
to  the  clerk  having  been  held  to  be  merely  colorable,  the  Ger- 
mania Bank  being  regarded  as  the  beneficial  owner  of  the  stock. 


Suits  Against  Stockholders  on  Their  Statutory  Liability  May 
Be  Brought  at  Any  Time  Within  Twenty  Years. 

What  is  the  period  of  limitation  on  suits  by  a  receiver  against  the 
stockholders  of  a  bank  to  enforce  their  individual  liability? 

This  question  is  settled  by  the  case  of  Wheatley  v.  Glover,  125 
Ga.  710.  It  was  there  held  that  the  liability  being  a  liability  fixed 
by  statute  is  governed  by  the  period  of  limitation  fixed  by  §  4360 
of  the  Code,  which  is  twenty  years. 


Person  in  Whose  Name  Stock  Stands  on  Books  of  Bank  Is 
Primarily  Liable  for  Assessment,  Though  Stock  in  Fact 
Transferred. 

A  stockholder  in  a  national  bank  sold  his  stock  to  the  cashier  of  the 
bank.  The  transfer  of  the  stock  was  not  made  on  the  books  of  the  bank. 
Shortly  after  the  sale,  the  bank  became  insolvent.  Would  the  seller  of  the 
stock  be  liable  on  his  statutory  personal  liability?  Would  not  the  notice  to 
the  cashier,  who  purchased  the  stock,  be  notice  to  the  bank  of  the  transfer, 
and  thus  relieve  the  seller  of  his*  statutory  liability? 

The  stockholder  would  not  be  relieved  unless  the  transfer  was 
made  on  the  books  of  the  bank.  The  rule  is  thus  stated  in  Michie 
on  Banks  and  Banking,  p.  1865 : 

"A  person  who  appears  upon  the  records  of  a  national  bank 
to  be  a  stockholder  at  the  time  the  bank  becomes  insolvent,  is  sub- 
ject to  statutory  personal  liability  of  shareholder,  although  he  has 
previously,  in  good  faith,  sold  his  stock.  To  relieve  a  holder  of 
national  bank  stock  from  his  liability  for  the  debts  of  the  bank,  a 
transfer  by  him  must  be  made  on  the  books  of  the  bank;  the 
ordinary  method  of  signing  the  power  of  attorney  thereon  is  in- 
sufficient." 

This  quotation  is  abundantly  supported  by  authority. 

I  do  not  think  that  the  bank  had  notice  through  the  cashier  who 


456  PARK'S  BANKING  LAW  OF  GEORGIA. 

purchased  the  stock  and  to  whom  it  should  have  been  transferred. 
Since  the  cashier  was  acting  for  himself  in  the  transaction,  any 
knowledge  gained  by  him  would  not  be  notice  to  the  bank.  It 
has  been  held  by  the  Supreme  Court  of  Georgia  that  "  a  cor- 
poration is  not  to  be  charged  with  notice  of  facts  of  which  its 
president  acquires  knowledge  while  dealing  in  his  private  ca- 
pacity and  in  his  own  behalf  with  third  persons."  Peoples  Bank 
v.  Exchange  Bank,  116  Ga.  820.  This  principle  would  apply  in 
the  case  of  a  cashier  or  other  officer  of  the  bank,  as  well  as  in  case 
of  the  president.  The  principle  of  the  case  above  quoted  has  been 
repeatedly  announced  by  the  Supreme  Court.  Eng.  Amer.  L.  & 
T.  Co.  v.  Hiers,  112  Ga.  823  ;  Brobston  v.  Penniman,  97  Ga.  527; 
Morris  v.  Banking  Co.,  109  Ga.  12;  National  Bank  v.  Demere,  92 
Ga.  735. 

It  is  suggested  that  the  case  of  Whitney  v.  Butler,  decided  by 
the  Supreme  Court  of  the  United  States,  and  reported  in  118  U. 
S.  655,  30  L.  Ed.  266,  conflicts  with  the  principles  above  an- 
nounced. It  is  held  in  that  case  that  "the  responsibility  of  the 
defendants  ceased  upon  the  surrender  of  certain  stock  certificates 
to  the  bank,  and  the  delivery  to  its  president  of  a  power  of  at- 
torney sufficient  to  effect,  and  intended  to  effect,  as  that  officer 
knew,  a  transfer  of  the  stock  on  the  books  of  the  association 
to  the  purchaser ;  although  such  transfer  Was  not  in  fact  made." 

It  will  be  noted  from  this  case,  however,  that  the  certificates 
had  been  surrendered  to  the  bank  itself,  accompanied  by  a  power 
of  attorney  authorizing  the  transfer,  and  that  the  president  of 
the  bank  was  advised  that  the  transfer  should  be  made,  the  presi- 
dent himself  not  being  in  any  way  interested  in  the  purchase  of 
the  stock. 

The  cases  which  Mr.  Justice  Harlan  distinguishes  in  this  case, 
according  to  his  statement  of  them,  hold  that  the  seller  is  liable 
as  a  shareholder,  even  where  the  buyer  has  agreed  to  have  the 
transfer  made  on  the  books  of  the  bank,  but  fraudulently  or  neg- 
ligently failed  to  do  so.  They  also  hold  that  the  liability  of  the 
shareholder  continues  until  there  is  a  transfer  on  the  books  of 
the  bank,  even  where  he  has  in  good  faith  previously  sold  the 
stock  and  delivered  to  the  buyer  the  certificate  with  power  of  at- 
torney in  such  form  as  to  enable  the  transfer  to  be  made.  Under 
these  rulings,  there  would  seem  to  be  no  question  as  to  the  seller's 
liability,  unless  the  bank  had  some  other  notice  of  the  transfer 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  457 

than  the  knowledge  of  the  cashier  to  whom  the  stock  had  been 
sold. 

NOTE. — Under  the  Banking  Act,  §  140,  the  rule  is  the  same  with  refer- 
ence to  State  banks  as  that  above  stated. 


SURETY. 


Consent  of  Surety  Necessary  to  Extension  in  Favor  of  Maker. 

Where  a  note  held  by  a  bank  is  secured  by  personal  security  and  the 
maker  desires  to  attach  a  cotton  receipt  and  extend  the  note,  can  the  bank 
hold  the  personal  security  without  notifying  him? 

In  order  to  hold  the  surety  still  liable  on  the  note,  it  would  not 
only  be  necessary  to  notify  him  but  also  to  have  his  consent  to  the 
extension  of  time.  A  contract  of  suretyship  is  one  of  strict  law, 
and  a  surety's  liability  cannot  be  extended  or  changed  in  any  way, 
without  his  consent.  A  change  of  the  terms  of  a  contract  without 
the  consent  of  the  surety  discharges  him.  Any  act  of  the  creditor 
which  injures  the  surety  or  increases  his  risk  or  exposes  him  to 
greater  liability  will  discharge  the  surety.  A  mere  failure  by  the 
creditor  to  sue  as  soon  as  the  debt  becomes  due  will  not  release 
the  surety,  but  any  extension  based  upon  additional  security  or 
any  other  consideration  will  release  the  surety  unless  he  consents. 
This  is  very  clearly  provided  by  §§  3543  and  3544  of  Park's  Ann. 
Code. 


TAXATION. 


How  Return  of  Banks  for  State  and  County  Taxes  Should 

Be  Made. 

What  is  the  proper  way  to  make  the  returns  of  a  bank  for  State  and 
county  tax? 

The  statute  makes  this  quite  plain,  but  neither  the  tax  authori- 
ties nor  the  banks  generally  seem  to  understand  how  it  should  be 
done.  The  Act  of  1909,  which  is  codified  as  §  991,  Park's  Ann. 
Code,  provides : 

"No  tax  shall  be  assessed  upon  the  capital  of  banks,  or  banking 
associations,  organized  under  the  authority  of  this  State,  or  of  the 
United  States,  located  within  this  State,  but  the  shares  of  the 
stockholders  of  the  banks  or  banking  associations,  whether  resi- 


458  PARK'S  BANKING  LAW  OF  GEORGIA. 

dent  or  nonresident  owners,  shall  be  taxed  in  the  county  where 
the  banks  or  banking  associations  are  located,  and  not  elsewhere, 
at  their  full  market  value,  including  surplus  and  undivided  profits, 
at  the  same  rate  provided  in  this  article  for  the  taxation  of 
moneyed  capital  in  the  hands  of  private  individuals;  provided, 
that  nothing  in  this  section  contained  shall  be  construed  to  re- 
lieve such  banks  or  banking  associations  from  the  tax  on  real 
estate  held  or  owned  by  them ;  but  they  shall  return  said  real 
estate  at  its  fair  market  value,  in  the  county  where  located. 
Provided,  further,  That  where  said  real  estate  is  fully  paid  for, 
the  value  at  which  it  is  returned  for  taxation  may  be  deducted 
from  the  market  value  of  their  shares ;  and  if  said  real  estate 
is  not  fully  paid  for,  only  the  value  at  which  the  equity  owned 
by  them  therein  is  returned  for  taxation  shall  be  deducted  from 
the  market  value  of  their  shares. 

"The  banks  or  banking  associations  themselves  shall  make  the 
returns  of  the  property  and  the  shares  herein  mentioned,  and  pay 
the  taxes  herein  provided.  Provided,  further,  That  all  property 
used  in  conducting  or  operating  a  branch  bank  shall  be  returned 
for  taxation  in  the  county  where  such  branch  bank  may  be  lo- 
cated. The  true  intent  and  meaning  of  this  section  is  that  the 
bank  itself  shall  return  for  taxation  and  pay  the  taxes  on  the 
full  market  value  of  all  shares  of  said  bank  stock." 

As  a  concrete  example  a  bank  has  a  capital  of  $50,000.00, 
surplus  and  undivided  profits,  $25,000.00.  This  would  make  the 
book  value  of  its  stock  $150.00  per  share.  As  there  are  500  shares 
at  $150.00  per  share,  the  amount  would  be  $75,000.00.  However, 
the  market  value  is  hardly  ever  as  much  as  the  book  value.  If 
from  recent  sales  a  market  value  has  been  established,  this  market 
value  should  be  substituted  for  the  book  value  in  determining 
the  value  of  the  shares.  If  there  have  been  no  recent  sales  from 
which  the  market  value  can  be  arrived  at,  I  think  the  bank  would 
be  safe  in  making  the  market  value  somewhat  less  than  the  book 
value.  Having  arrived  at  the  value  of  the  stock,  the  bank  would 
be  authorized  to  reduce  the  value  in  the  same  proportion  that  the 
market  value  of  other  property  in  the  county  is  reduced  in  making 
returns  for  taxes.  This  proportion  varies  somewhat  in  the  dif- 
ferent counties,  usually  ranging  from  approximately  sixty  to 
seventy-five  per  cent.  If  the  aggregate  market  value  of  its  shares 
is  $75,000.00,  and  other  property  is  returned  at  seventy-five  per 
cent,  of  its  value,  the  bank  would  be  authorized  to  deduct  twenty- 
five  per  cent,  from  the  $75,000.00  to  arrive  at  the  market  value  of 
its  shares.  Now,  suppose  the  bank  owns  its  building  and  other 
real  estate  amounting  to  $10,000.00.  This  should  be  separately 
returned  on  the  same  proportional  basis  that  other  property  bears, 


OPINIONS  OF  THE  GENERAL  COUNSEL.  459 

and  this  amount  should  be  deducted  from  the  market  value  of  the 
shares  so  that  the  return  would  show  market  value  of  shares 
$56,250.00  (being  $75,000.00  at  seventy-five  per  cent.)  less  real 
estate  $7,500.00  (being  $10,000.00  at  seventy-five  per  cent,  of  ac- 
tual value),  total  value  of  shares  and  real  estate,  $56,250.00. 

In  the  blank  furnished  by  the  taxing  authorities  are  questions  to 
be  answered  by  the  presidents  of  the  banks,  framed  with  a  view 
to  arriving  at  the  result  above  reached.  The  questions  asked 
are,  how  many  shares  in  the  bank,  and  what  is  the  market  value ; 
also  what  is  the  market  value  of  real  estate ;  then  the  question 
is  also  asked  how  much  capital,  surplus  and  undivided  profits. 
The  idea  apparently  is  to  get  this  as  a  basis  for  determining 
whether  or  not  the  market  value  of  the  shares  is  correctly  given. 
These  are  not  questions  to  be  answered  by  the  bank  in  making 
its  own  return,  but  seem  to  be  framed  with  a  view  to  reaching  the 
conscience  of  the  president  and  determining  from  his  return 
whether  or  not  the  bank's  return  is  correct. 

NOTE. — Since  this  opinion  was  written,  the  Banking  Act  was  passed. 
Section  3  of  this  act  contains  this  further  provision  as  to  the  taxation  of 
branch  banks :  "Branch  banks  shall  be  taxed  on  the  capital  set  aside  to 
their  exclusive  use  in  the  counties,  municipalities  and  districts  in  which 
they  are  located,  and  the  parent  bank  shall  be  relieved  of  taxation  to  the 
extent  of  the  capital  set  aside  for  the  exclusive  use  of  such  branches." 


Real  Estate  Owned  by  Bank  Must  Be  Returned  in  County  in 
Which  It  Is  Located. 

How  is  real  estate  owned  by  a  bank  in  a  county  other  than  that  in  which 
the  bank  is  located  returned  for  State,  county  and  municipal  taxation? 

Under  §  991,  Park's  Ann.  Code,  real  estate  owned  by  a  bank 
is  to  be  returned  for  taxation  in  the  county  in  which  it  is  located 
and  the  value  thereof  may  be  deducted  from  the  market  value  of 
the  shares  of  stock.  The  bank's  return  would  show  so  much  real 
estate  in  the  county  in  which  the  bank  is  located,  so  much  real 
estate  in  other  counties.  This  should  then  be  deducted  from  the 
market  value  of  its  shares,  and  the  bank  would  pay  taxes  in  the 
county  in  which  it  is  located  on  the  difference. 


460  PARK'S  BANKING  LAW  OF  GEORGIA. 

Liberty  Bonds  Cannot  Be  Deducted  from  the  Market  Value 
of  the  Shares  of  Stock  in  Making  Tax  Returns. 

A  considerable  portion  of  a  bank's  surplus  is  invested  in  Liberty  Bonds. 
The  bank  bought  these  bonds  with  the  understanding  that  they  would  not 
be  subject  to  taxation.  Can  county  and  city  authorities  tax  the  capital 
and  surplus  as  though  the  bank  had  no  such  investment  in  bonds? 

Under  our  law,  banks  are  not  taxed  upon  their  capital  and 
surplus,  nor  upon  their  properly,  except  real  estate.  The  taxes 
which  the  banks  are  required  to  pay  are  taxes  against  the  stock- 
holders on  the  market  value  of  their  shares  of  stock.  The  bank 
is  required  to  pay  on  its  real  estate,  and  is  authorized  to  deduct 
the  value  of  the  real  estate  from  the  aggregate  market  value  of 
the  shares  of  stock ;  but,  except  on  the  real  estate,  the  tax  is  not 
against  the  bank,  but  is  against  the  stockholders. 

Our  tax  act,  so  far  as  banks  are  concerned,  is  practically  copied 
from  the  National  Bank  Act  which  prohibits  the  States  from  tax- 
ing national  banks,  but  authorizes  them  to  tax  shareholders  of 
national  banks  on  the  value  of  their  shares  of  stock. 

The  Supreme  Court  of  the  United  States  has  held  that,  under 
the  National  Bank  Act,  taxes  may  be  levied  on  the  full  value  of 
the  shares  of  stock,  regardless  of  the  fact  that  the  bank  may  own 
bonds  which  are  free  from  taxation.  Said  the  court  in  one  case : 

"The  Van  Allen  case  (3  Wall.  573,  18  L.  Ed.  229),  has  settled 
the  law  that  a  tax  upon  the  owners  of  shares  of  stock  in  corpora- 
tions, in  respect  of  that  stock  is  not  a  tax  upon  linked  States  se- 
curities which  the  corporations  own.  Accordingly,  such  taxes 
have  been  sustained  by  this  court,  whether  levied  upon  the  shares 
of  national  banks  by  virtue  of  the  congressional  permission,  or 
upon  shares  of  State  corporations  by  virtue  of  the  power  inherent 
in  the  State  to  tax  the  shares  of  such  corporation.  The  tax  as- 
sessed to  shareholders  may  be  required  by  law  to  be  paid  in  the 
first  instance  by  the  corporations  themselves,  as  the  debt,  and  in 
behalf  of  the  shareholder,  leaving  to  the  corporation  the  right  to 
reimbursement  for  the  tax  paid  from  their  shareholders,  either 
under  some  express  statutory  authority  for  their  recovery  or 
under  the  general  principle  of  law  that  one  who  pays  the  debt 
of  another,  at  his  request,  can  recover  the  amount  from  him. 
*  *  *  The  theory  sustaining  these  cases  is  that  the  tax  was 
not  upon  the  corporations'  holdings  of  bonds,  but  on  the  share- 
holders' holdings  of  stock."  Home  Savings  Bank  v.  City  of  Des 
Moines,  205  U.  S.  503,  51  L.  Ed.  901. 

Under  the  decisions  of  the  Supreme  Court,  the  amount  of  taxes 
to  be  paid  by  the  shareholders,  or  by  the  bank  for  them,  will  not 
be  affected  one  way  or  the  other,  because  among  the  bank's  assets 
are  Government  bonds  which  are  tax  free.  The  stock  is  assessed 


OPINIONS  OP  THE  GENERAL  COUNSEL.  461 

on  its  market  value  regardless  of  the  property  in  which  the  bank's 
assets  may  be  invested. 


Bank  Must  Itself  Make  the  Return  and  Pay  the  Taxes  for  Its 

Stockholders. 

Can  a  bank  furnish  the  county  tax  receiver  a  list  of  the  stockholders  of 
the  bank,  so  that  the  taxes  may  be  assessed  against  the  individual  stock- 
holders and  the  bank  in  that  way  relieved  of  the  payment  of  any  taxes 
whatever? 

It  is  not  possible  to  handle  the  matter  in  this  way.  Section  991 
of  Park's  Ann.  Code,  providing  for  the  taxation  of  banks,  re- 
quires that : 

"The  shares  of  the  stockholders  of  the  banks  or  banking  asso- 
ciations, whether  resident  or  nonresident  owners,  shall  be  taxed 
in  the  county  where  the  banks  or  banking  associations  are  located 
and  not  elsewhere.  *  *  *  The  banks  or  banking  associations 
themselves  shall  make  the  returns  of  the  property  (real  estate) 
and  the  shares  herein  mentioned  and  pay  the  taxes  herein  pro- 
vided. *  *  *  The  true  intent  and  meaning  of  this  section  is 
that  the  bank  itself  shall  return  for  taxation  and  pay  the  taxes 
on  the  full  market  value  of  all  shares  of  said  bank  stock." 

This  obviously  settles  the  question ;  the  bank  itself  being  re- 
quired to  make  the  return  and  to  pay  the  taxes  for  the  stock- 
holders. 


Banks  Are  Not  Required  to  Produce  Books  to  Tax  Officers  Ex- 
cept Under  Subpoena,  Where  Returns  of  Particular  Tax- 
payer Are  Under  Investigation. 

Has  the  legislature  passed  an  act  making  it  incumbent  upon  a  bank  to 
open  its  books  for  the  inspection  of  the  tax  collector? 

It  has  not.  There  is  a  section  of  the  Tax  Equalization  Act  of 
1913,  Park's  Ann.  Code,  §  1116  (m),  which  gives  to  the  county 
board  of  tax  assessors  authority  to  issue  subpoenas  for  the  attend- 
ance of  witnesses  and  "to  require  the  production  by  any  person 
of  all  his  books,  papers  and  documents  which  may  throw  any 
light  upon  the  question  of  the  existence  or  liability  of  property  of 
any  class  for  taxation."  Under  this  section  the  county  boards  of 
assessors  in  a  number  of  the  counties  have  called  on  the  banks  to 
produce  their  books  showing  their  individual  depositors  or  to  fur- 
nish lists  of  such  depositors  with  their  balances.  The  banks  have 


462  PARK'S  BANKING  LAW  OF  GEORGIA. 

generally  declined  to  do  this,  except  in  cases  where  the  return  of 
a  particular  taxpayer  was  being  investigated  by  the  board  and 
the  bank  was  called  on  to  produce  the  book  showing  the  account 
of  this  particular  taxpayer.  Where  the  board  is  investigating  a 
particular  return  and  regularly  issues  a  subpoena  requiring  the 
production  of  the  bank's  books  in  connection  with  this  particular 
return,  and  the  bank  fails  to  comply,  the  assessors  have  the  au- 
thority to  report  the  matter  to  the  ordinary,  who  may  upon  a 
hearing  impose  a  fine  not  to  exceed  $100.00  or  imprisonment  not 
exceeding  ten  days,  in  his  discretion.  But  the  county  board  of 
assessors  has  no  authority  to  require  a  bank  to  produce  its  books 
generally  or  to  open  its  books  for  their  inspection,  and  the  bank 
is  justified  in  declining  to  permit  any  such  inspection  by  the 
county  board  of  assessors  or  the  tax  collector,  or  any  other  agent 
or  authority. 


State  Banks  Are  Liable  for  Corporation  Tax. 

Is  a  bank  liable  to  the  corporation  tax  in  Georgia? 

This  tax  applies  to  all  corporations  incorporated  under  the  laws 
of  Georgia,  except1  those  that  are  not  organized  for  pecuniary  gain 
or  profit  and  those  that  neither  charge  or  contemplate  charging 
the  public  for  services  rendered,  and  is  expressly  made  in  addition 
to  all  other  taxes  required  of  them  by  law.  Banks  are  not  ex- 
cepted,  and  are  liable  for  the  payment  of  the  tax.  §  950,  Park's 
Ann.  Code. 


Municipalities  May   Levy  Special  License  or  Business  Tax 
on  State  Banks. 

Can  a  municipality  levy  a  special  license  or  business  tax  on  a  chartered 
State  bank? 

This  question  has  been  decided  by  the  Supreme  Court  of 
Georgia  in  the  case  of  the  City  of  Macon  v.  Macon  Savings 
Bank,  60  Ga.  133.  It  was  held  in  that  case  that  where  the  city 
charter  gives  to  the  city  "authority  to  tax  all  persons  exercising 
within  the  city  any  profession,  trade,  or  calling,  or  business  of  any 
nature  whatever,"  the  city  may  tax  chartered  banks  on  their 
business,  to  the  same  extent  that  private  banks  are  taxed  therein. 
This  decision  has  been  followed  several  times  in  later  cases  and 
seems  to  be  the  fixed  law  of  the  State. 


OPINIONS  OF  THE  GENERAL  COUNSEL.  463 

National  Banks  Are  Not  Subject  to  License  Taxes. 

Has  a  city  the  right  to  require  national  banks  to  pay  license  taxes  ? 

In  the  case  of  City  of  Macon  v.  First  National  Bank,  59  Ga. 
648,  it  was  held : 

"Whilst  the  property  owned  by  the  bank  may  be  taxed  by  State 
authority,  and  the  shares  owned  by  the  stockholders  may  be  also 
taxed,  the  business  of  the  bank — its  right  to  operate  and  do  bank- 
ing business — cannot  be  taxed  by  the  States.  *  *  *  The  dis- 
tinction between  the  right  to  tax  property  and  that  to  tax  business 
in  cases  of  agencies  working  under  Federal  authority  is  well 
settled,  we  think,  by  the  Supreme  Court  of  the  United  States." 

And  in  the  case  of  Johnston  v.  Mayor  and  Council  of  Macon, 
62  Ga.  645,  it  was  said : 

"It  could  not  tax  the  business  of  the  national  bank,  because  it 
was  chartered  by  Congress,  and  the  Government  of  the  United 
States  used  its  business  for  their  fiscal  operations,  or  could  use  it, 
and  any  interference  by  State  taxation  might,  if  allowed  at  all, 
amount  to  prohibition — by  making  the  tax  so  high  as  to  be  pro- 
hibitory." 

In  the  case  of  Linton  v.  Childs,  105  Ga.  567,  after  quoting  from 
the  59  Ga.  and  62  Ga.  cases  above  referred  to,  the  court  says : 

"Considering,  then,  the  propositions  that  a  State  cannot,  by 
taxation  or  other  legislation,  impair  or  destroy  the  efficiency  of 
the  operation  of  any  Federal  agency  created  by  a  constitutional 
act  of  Congress  to  further  and  serve  the  purposes  of  the  Govern- 
ment of  the  United  States,  and  that  national  banking  associations 
are  one  of  such  agencies  whose  business  cannot  be  taxed  by  the 
State  as  fully  established,  it  may  be  well  to  inquire  into  the  na- 
ture of  the  tax  imposed." 

The  court  then  held  that  the  tax  imposed  on  the  presidents  of 
each  of  the  banks  of  the  State,  including  all  banks  doing  business 
in  the  State,  is  inoperative  when  sought  to  be  applied  to  the  presi- 
dents of  national  banking  associations  organized  under  the  Acts 
of  Congress,  because  the  State  had  no  right  to  tax  the  business 
of  such  banks. 

These  cases  are  based  on  the  leading  case  of  McCulloch  v. 
Maryland,  4  Wheaton  316,  4  L.  Ed.  579,  which  was  the  famous 
decision  by  Chief  Justice  Marshall,  in  which  it  was  held  that  the 
States  had  no  right  to  tax  the  Bank  of  the  United  States  or  its 
branches. 

"The  State  governments,"  said  the  Chief  Justice,  "have  no 
right  to  tax  any  of  the  constitutional  means  employed  by  the  Gov- 
ernment of  the  Union  to  execute  its  constitutional  powers." 


464  PARK'S  BANKING  LAW  OF  GEORGIA. 

Since  this  decision  the  power  of  the  Government  to  carry  on  its 
business  through  any  means  or. instrumentalities  which  it  might 
choose  and  free  from  any  interference  by  taxation  or  otherwise 
on  the  part  of  the  States,  has  been  universally  recognized. 


National  Banks  Cannot  Be  Taxed  on  Their  Deposits,  but  Tax 
May  Be  Levied  Against  the  Depositors  and  Collected 
Through  the  Bank  as  Their  Agent. 

If  the  State  should  tax  banks  on  their  deposits,  would  such  a  law  apply 
to  national  banks?  Can  the  State  compel  a  national  bank  to  furnish  the 
taxing  authorities  a  list  of  depositors  with  the  amounts  of  their  balances? 

The  Supreme  Court  of  the  United  States  has  held  that  a  State 
is  without  power  to  tax  national  banks  except  under  the  per- 
missive legislation  of  Congress.  Under  §  5219  of  the  United 
States  Revised  Statutes  the  power  of  a  State  to  tax  national  banks 
is  confined  to  the  taxation  of  the  shares  of  stock  in  the  hands  of 
the  shareholders  and  to  an  assessment  on  the  real  estate  of  the 
bank.  Any  other  tax  than  this  is  void.  Owensboro  National 
Bank  v.  City  of  Owensboro,  173  U.  S.  664,  43  L.  Ed.  850. 

There  have  been  numerous  cases  in  which  State  tax  acts  in 
conflict  with  this  rule  have  been  held  to  be  void,  so  far  as  national 
banks  are  concerned.  There  is  no  doubt  that  if  the  State  should 
undertake  to  levy  a  tax  against  the  bank  itself  based  on  its  de- 
posits such  tax  would  not  apply  to  national  banks. 

But  there  is  nothing  in  the  National  Bank  Act  which  prohibits 
the  States  from  taxing  the  depositors  of  a  national  bank  on  the 
amount  of  their  deposits.  Indeed,  in  Georgia,  and  in  most  of  the 
States,  the  amounts  of  their  deposits  are  supposed  to  be  included 
by  the  taxpayers  in  their  returns  for  taxation,  just  as  any  other 
indebtedness  due  the  taxpayer  is  returned. 

There  is  no  reason  why  a  national  bank  may  not  be  appointed 
as  the  agent  of  the  State  to  collect  the  taxes  from  its  depositors, 
just  as  it  pays  for  its  stockholders  the  taxes  on  their  shares  of 
stock.  Acting  as  such  agent  would  not  interfere  with  the  bank  in 
the  discharge  of  any  of  its  obligations  to  the  Federal  Govern- 
ment ;  and,  as  such  tax  would  not  be  against  the  bank,  there 
would  seem  to  be  no  reason  why  it  should  not  be  levied  On  the 
depositor  and  collected  through  the  bank. 

This  has  been  decided  by  the  Supreme  Court  of  Vermont,  con- 
struing an  act  of  that  State,  similar  in  its  terms  to  the  recent  act 


OPINIONS  OF  THE  GENERAL  COUNSEL.  465 

of  Kentucky,  so  much  discussed  in  Georgia.     This  decision  is 
summarized  in  Pratts'  Digest,  p.  159,  as  follows: 

"The  rule  that  a  State  can  exercise  no  control  over  a  national 
bank,  except  as  Congress  may  permit,  does  not  prevent  the  States 
from  taxing  the  deposits  therein  against  the  depositors ;  and  the 
State  may  make  the  bank  its  agent  to  collect  the  tax.  State  v. 
Clement  Nat.  Bank,  84  Vt.  167." 

The  case  itself,  reported  in  78  Atl.  944,  goes  very  fully  into  the 
whole  question  of  the  exemption  of  national  banks  from  State  tax- 
ation, but  says  "there  is  no  provision  in  the  Federal  law  depriv- 
ing a  State  of  the  power  to  tax  deposits  in  national  banks  to 
depositors." 

The  right  of  the  State  to  tax  a  national  bank  on  its  deposits, 
is  altogether  different  from  the  right  of  a  State  to  tax  the  de- 
positors themselves  on  their  deposits  in  a  national  bank.  A  tax 
against  the  bank  would  be  in  the  nature  of  a  business  tax,  and  the 
State  would  be  unauthorized  to  put  such  tax  on  a  national  bank, 
Congress  not  having  given  to  the  State  the  right  to  tax  a  national 
bank,  except  upon  its  real  estate,  although  it  authorizes  a  tax  upon 
the  market  value  of  the  shares  of  stock,  as  hereinbefore  stated. 

The  question  as  to  the  right  of  the  State  to  compel  a  national 
bank  to  furnish  a  list  of  depositors  with  amounts  of  their  de- 
posits, etc.,  for  the  purpose  of  taxation,  seems  also  to  have  been 
decided.  I  quote  from  the  case  of  the  First  National  Bank  of 
Youngstown  v.  Hughes,  6  Fed.  737 : 

"A  national  bank  may  be  compelled  to  disclose  the  names  of 
its  depositors,  and  the  amounts  of  their  deposits,  under  the  com- 
pulsory process  of  a  state  court,  in  order  to  ascertain  whether  any 
money  deposited  therein,  ^subject  to  taxation  within  the  county, 
has  not  been  duly  returned  for  that  purpose  by  the  owners." 


Municipality  Cannot  Tax  Its  Own  Bonds. 

Can  a  municipality  levy  a  tax  on  its  own  bonds? 
I  do  not  think  so.    The  Supreme  Court  in  the  case  of  Penick, 
Tax  Collector,  v.  Foster,  129  Ga.  217,  says: 

"The  general  rule  is  that  public  property  and  the  various  in- 
strumentalities of  government  are  not  subject  to  taxation.  This 
immunity  rests  upon  the  most  fundamental  principles  of  govern- 
ment ;  being  necessary  in  order  that  the  functions  of  government 
be  not  unduly  impeded,  and  that  the  government  be  not  forced 
into  the  inconsistency  of  taxing  itself  in  order  to  raise  money  to 
pay  over  to  itself.  *  *  * 
30 


466  PARK'S  BANKING  LAW  OF  GEORGIA. 

"Bonds  issued  by  a  municipal  corporation,  as  evidence  of  a  loan 
made  to  it,  are  instrumentalities  of  the  government  which  creates 
the  municipal  corporation.  *  *  * 

"Bonds  issued  by  a  municipal  corporation  of  this  State  in  the 
hands  of  a  resident  of  this  State  are  not  taxable  by  this  State  or 
any  county  thereof." 

And  in  the  earlier  case  of  the  City  of  Macon  v.  Jones,  67  Ga. 
489,  the  court  said : 

"The  grant  of  power  in  the  charter  of  a  municipal  corporation 
to  tax  all  property,  real  and  personal,  within  the  corporate  limits 
of  the  city  will  not  be  construed  to  include  the  taxing  of  its  own 
bonds  in  the  absence  of  express  authority  for  that  purpose." 

It  seems  clear  from  these  decisions  that  a  city  or  town  has  no 
power  to  tax  its  own  bonds  in  the  absence  of  express  legislative 
authority  for  the  purpose. 


Money  Is  Personal  Property  and  Subject  to  Taxation. 

Is  there  any  form  of  money  in  circulation  that  is  not  subject  to  tax  by 
local  authorities? 

Money  is  generally  regarded  as  a  proper  subject  for  taxation. 
The  rule  is  thus  stated  by  the  Cyclopedia  of  Law  and  Procedure, 
Vol.  37,  p.  783  : 

"Money  is  not  only  the  standard  of  value,  but  is  also  taxable 
personal  property  of  the  owner,  provided  he  has  it  in  his  posses- 
sion at  the  time  of  the  assessment  or  it  is  held  for  him  by  a  person 
from  whom  he  is  entitled  to  receive  it  on  demand." 

The  Supreme  Court  of  the  United  States  has  recognized  the 
right  of  the  States  to  tax  money,  and  this  although  capital  was 
employed  in  interstate  or  foreign  commerce,  which  itself  is  not 
taxable.  People  v.  N.  Y.  Tax  Commissioners,  104  U.  S.  466,  26 
L.  Ed.  632. 

It  is  not  meant,  of  course,  that  a  State  or  a  municipality  could 
tax  as  such  treasury  notes  or  other  forms  of  currency  issued  by 
the  United  States  or  its  agencies  as  a  means  of  borrowing  money 
on  the  credit  of  the  United  States.  It  has  been  frequently  held, 
following  the  decision  of  Chief  Justice  Marshall  in  Weston  v. 
City  Council  of  Charleston,  2  Peters  449,  7  L.  Ed.  481,  that  the 
States  have  no  power  by  taxation  or  otherwise  to  retard,  or 
burden,  or  in  any  manner  control  the  operations  of  the  Federal 
Government  or  limit  its  power  in  the  discharge  of  its  constitu- 
tional rights.  If  the  State  could  tax  treasury  notes  as  such,  it 


OPINIONS  of  THE  GENERAL  COUNSEL.  467 

could,  of  course,  drive  them  out  of  the  market,  and  thus  prevent 
Congress  from  employing  this  means  of  borrowing  money.  But, 
a  tax  on  personal  property,  including  money,  notes  and  securities, 
is  not  considered  a  tax  on  the  operations  of  the  government  or  re- 
garded as  unconstitutional,  although  the  taxpayer  might  have  on 
hand  on  the  day  fixed  for  the  assessment  a  quantity  of  treasury 
notes  or  other  currency,  issued  by  the  government  or  through  its 
instrumentalities.  Such  a  tax  would  not  be  levied  on  these  notes 
as  such,  but  simply  on  the  money  as  personal  property,  regardless 
of  the  particular  character  of  circulating  medium  in  which  it 
might  chance  to  be. 


Bills  Receivable  Due  Individual  Are  Subject  to  Taxation. 

Are  bills  receivable  due  an  individual  operating  a  private  bank  subject 
to  taxation? 

The  law  expressly  provides  that : 

"Promissory  notes,  accounts,  judgments,  mortgages,  liens  of 
all  kinds,  and  all  choses  in  action  shall  be  given  in  at  their  value, 
whether  solvent  or  partially  solvent."  Park's  Ann.  Code,  §  1003. 

If  the  law  is  strictly  followed,  bills  receivable  should  be  re- 
turned and  taxed  just  exactly  like  horses  or  mules  or  physical 
property,  and  without  deduction  because  the  taxpayer  may  have 
liabilities. 

Of  course,  a  different  rule  applies  to  banks,  that  is,  incorpor- 
ated banks,  the  Code  section  clearly  indicating  that  the  tax  on 
"banks"  applies  only  to  corporations  doing  a  banking  business,  for 
it  is  provided  that 

"The  shares  of  the  stockholders  of  the  banks  or  banking  asso- 
ciations *  *  *  shall  be  taxed,  etc."  Park's  Ann.  Code,  § 
991. 


TAX  FL  FAS. 


Duration  of  Lien  of  Tax  FL  Fas.  on  Property. 

How  long  is  a  tax  fi.  fa.  a  lien  on  property  after  it  is  recorded,  and  when 
does  the  lien  run  out? 

The  question  is  fully  answered  by  the  Code.    I  quote  the  sec- 
tions applicable: 

§  1147:   "All  State,  county,  city  or  other  tax  fi.  fas.,  before  or 
after  legal  transfer  and  record,  shall  be  enforced  within  seven 


468  PARK'S  BANKING  LAW  of  GEORGIA. 

years  from  the  date  of  their  issue;  or  within  seven  years  from 
the  time  of  the  last  entry  upon  the  tax  fi.  fa.  by  the  officer  au- 
thorized to  execute  and  return  the  same,  if  said  entry  is  properly 
entered  by  said  officer  upon  the  execution  docket  and  books  .in 
which  said  entries  are  now  required  to  be  made  in  cases  of  entries 
on  executions  issued  on  judgments." 

§  1148:  "All  laws  in  reference  to  a  period  of  limitation  as  to 
ordinary  executions  for  any  purpose,  or  to  the  length  of  time  or 
circumstances  under  which  they  lose  their  lien  in  whole  or  in 
part,  are  made  applicable  to  tax  fi.  fas." 

§  5950 :  "When  any  person  has  bona  fide,  and  for  a  valuable 
consideration,  purchased  real  or  personal  property,  and  has  been 
in  the  possession  of  such  real  property  for  four  years,  or  of  such 
personal  property  two  years,  the  same  shall  be  discharged  from 
the  lien  of  any  judgment  against  the  person  from  whom  he  pur- 
chased." 


TIMBER. 


What  Is  a  Reasonable  Time  Within  Which  to  Cut  and  Re- 
move Timber,  Depends  upon  the  Facts  and  Circumstances 
of  the  Particular  Transaction. 

Where  timber  is  sold  without  any  time  limit  for  its  removal,  what  is 
regarded  by  the  law  as  a  reasonable  time  within  which  to  cut  and  remove 
the  timber? 

What  is  a  reasonable  time  is  always  a  question  of  fact,  de- 
pending upon  the  circumstances  of  each  particular  case.  The  law 
never  fixes  a  reasonable  time.  The  time  might  be  so  long  or 
so  short  that  it  could  be  said  as  a  matter  of  law  that  it  was  or 
was  not  reasonable,  but  a  reasonable  time  is  a  question  of  fact, 
rather  than  of  law.  In  order  to  determine  what  is  a  reasonable 
time  all  the  facts  and  circumstances  must  be  taken  into  considera- 
tion. For  instance,  the  purpose  for  which  the  timber  is  sold,  the 
quantity  of  timber,  its  accessibility,  the  nearness  of  tram-road  or 
other  facilities  for  hauling,  whether  the  timber  is  in  a  large  or 
small  tract,  in  other  wards,  everything  that  would  illustrate  the 
intention  of  the  parties  at  the  time  the  contract  was  made,  what 
they  contemplated  as  to  the  removal  of  the  timber,  and  every- 
thing that  would  throw  any  light  on  the  length  of  time,  which 
under  normal  conditions  would  be  proper  and  reasonable  to  be 
consumed  in  cutting  and  removing  the  timber.  The  average 
time  usually  fixed  in  timber  leases  of  the  same  class,  and  in  the 


OPINIONS  OF  THE  GENERAL  COUNSEL.  469 

same  general  locality,  would  naturally  be  something  of  a  guide  in 
determining  what  was  or  was  not  a  reasonable  time. 

It  should  be  borne  in  mind  that  it  is  quite  possible  for  timber 
to  be  conveyed  in  perpetuity  without  any  limit  of  time,  and  so  that 
the  purchaser,  his  heirs  or  assigns,  would  have  the  right  to  re- 
move it  any  time  without  regard  to  the  reasonableness  of  the 
period,  or  might  delay  indefinitely  the  removal  of  the  timber. 
I  quote  from  a  case  decided  by  the  Supreme  Court : 

"The  paramount  consideration  in  the  construction  of  every 
instrument  conveying  growing  trees,  with  the  right  to  cut  and  re- 
move them,  is  the  intention  of  the  parties  as  contained  in  the  writ- 
ing. If  that  intention  be  a  sale  and  purchase  of  the  trees,  to  be 
held  as  land,  with  a  perpetual  right  of  entry  to  remove  them,  the 
vendor  is  estopped  by  his  own  grant  from  compelling  the  vendee 
to  cut  and  remove  the  trees  at  his  own  will,  or  even  within  a 
reasonable  time.  But  if  the  instrument  reflects  the  intention  of 
the  parties  to  sell  the  timber,  to  be  cut  and  removed  within  a  rea- 
sonable time,  the  interest  or  estate  therein  conveyed  terminates 
and  becomes  forfeited  by  a  failure  to  cut  and  remove  the  timber 
according  to  the  terms  of  the  grant.  The  grant  of  a  perpetual 
right  of  entry  upon  the  land  of  another  to  remove  the  timber 
thereon  operates  so  harshly  and  unreasonably  upon  the  owner  of 
the  land  that  it  should  never  be  given  this  effect,  unless  it  is 
plainly  manifest  from  the  terms  of  the  deed  that  such  was  the 
intention  of  the  parties."  North  Georgia  Co.  v.  Bebee,  128  Ga. 
563. 


TRANSFER  PENDING  SUIT. 


Transfer  of  Property  Is  Not  Prevented  by  Filing  of  Suit. 

After  suit  is  begun  on  a  note,  but  before  judgment  is  obtained,  the 
debtor  transfers  his  property  to  his  wife.  Is  this  transfer  valid? 

The  mere  filing  of  a  suit  does  not  prevent  the  transfer  or  sale 
of  property  so  long  as  it  is  sold  or  transferred  for  a  valuable 
consideration  and  the  transfer  is  made  in  good  faith,  and  not  for 
the  purpose  of  hindering,  delaying  or  defrauding  creditors.  It 
does  not  appear  from  the  statement  whether  this  transfer  was  for 
value  or  not.  Of  course,  a  person  cannot  make  a  gift  of  his  prop- 
erty, so  as  to  defeat  the  payment  of  his  debts,  and  such  a  trans- 
fer could  be  set  aside.  However,  if  the  wife  purchased  property 
from  her  husband,  paying  full  value,  and  the  transaction  was 
bona  fide  and  not  for  the  purpose  of  hindering,  delaying  or  de- 
frauding creditors,  the  title  would  pass,  and  could  not  be  sue- 


470  PARK'S  BANKING  LAW  OF  GEORGIA. 

cessfully  attacked.  All  transactions  between  husband  and  wife, 
where  the  husband  is  in  debt,  are  very  closely  scrutinized,  how- 
ever, and  the  burden  is  upon  them  to  show  that  the  transaction 
is  fair  in  every  particular.  Of  course,  after  a  judgment  has  been 
rendered  and  properly  entered  upon  the  execution  docket,  no  sale 
could  be  made.  The  lien  of  the  judgment  would  attach  to  the 
property,  and  no  transfer  could  be  made  so  as  to  defeat  the  lien. 


TRUST  COMPANY. 


Cannot  Issue  Ordinary  Negotiable  Bonds. 

Has  a  trust  company  the  power  to  issue  bonds? 

I  do  not  think  so.  The  powers  of  trust  companies  organized 
under  the  general  law  of  Georgia  do  not  seem  to  include  the  right 
to  issue  ordinary  negotiable  bonds.  The  nearest  approach  to  the 
power  is  this : 

"When  moneys  or  securities  for  moneys  are  borrowed  or  re- 
ceived on  deposit  or  for  investment,  the  bonds  or  obligations  of 
the  company  may  be  given  therefor."  Park's  Ann.  Code,  §  2817 
(11). 

While  this  language  is  not  altogether  clear,  I  understand  it  to 
mean  that  the  company  can  issue  certificates  of  deposit  or  obliga- 
tions substantially  equivalent  to  certificates  of  deposit  therefor.  I 
do  not  think  this  would  authorize  the  pledging  of  the  company's 
securities  with  a  trustee  and  issuing  negotiable  bonds  secured 
by  such  pledge.  So  far  as  I  am  advised,  the  issuance  of  bonds  by 
trust  companies  is  altogether  unusual.  In  fact,  it  does  not  seem 
to  be  a  proper  power,  and  I  do  not  think  there  is  any  doubt  but 
that  the  power  is  not  granted  to  a  trust  company  organized  under 
law  of  Georgia. 


Use  of  Word  "Trust"  in  Name  of  Company  Chartered  to  Do 
General  Real  Estate  Business  Is  Not  Prohibited. 

Can  a  company  chartered  to  do  a  general  real  estate  business  use  the 
word  "trust"  in  its  name  without  being  regularly  incorporated  as  a  trust 
company  ? 

In  order  to  organize  a  regular  trust  company,  authorized  to  do 
trust  company  business,  the  charter  must  be  granted  by  the  sec- 


OPINIONS  OF  THE  GENERAL,  COUNSEL.  471 

retary  of  State  in  much  the  same  way  that  a  bank  charter  is 
granted.  The  capital  must  not  be  less  than  $100,000.00.  There 
is,  however,  no  prohibition  upon  the  use  of  the  word  "trust" 
by  corporations  other  than  authorized  trust  companies,  and 
there  are  quite  a  large  number  of  such  companies  doing  business 
in  the  State,  most  of  whom  are  really  nothing  more  than  real 
estate  companies.  The  propriety  of  the  use  of  the  word  "trust" 
as  a  part  of  the  name  of  such  a  company  is  doubtful,  but  there  is 
no  legal  prohibition  of  such  use. 

A  charter  can  be  granted  by  the  Superior  Court  to  do  the 
kind  of  business  mentioned  in  the  question,  and  there  is  no  re- 
quirement as  to  the  amount  of  capital  which  such  a  company  must 
have. 

Under  an  act  passed  in  1910,  Park's  Ann.  Code,  §  2821  (a-e), 
a  corporation  chartered  by  the  Superior  Court  to  do  a  general  real 
estate  business  may  have  conferred  upon  it  the  powers  of  a  trust 
company.  A  corporation  desiring  to  exercise  such  powers  must 
file  with  the  Secretary  of  State  an  application  for  an  amendment 
to  its  charter  conferring  upon  it  the  powers  and  privileges  of  trust 
companies.  The  amendment  must  be  authorized  by  a  majority 
vote  of  the  board  of  directors  at  a  regular  meeting,  and  it  cannot 
be  granted  to  a  corporation  which  does  not  have  a  paid  in  capital 
of  at  least  $100,000.00. 


USURY. 


Penalty  for  Usury  Is  Forfeiture  of  Entire  Interest  Charged. 

Can  an  individual  lending  money  at  a  usurious  rate,  taking  as  security 
deed  to  real  estate,  obtain  judgment  on  the  note?  Does  the  rule  making 
the  transaction  void  in  cases  of  a  corporation's  charging  usuary  in  papers 
secured  by  real  estate  apply  to  individuals? 

Formerly,  titles  infected  with  usury  were  void,  whether  the 
loans  were  made  by  individuals  or  corporations.  This  did  not 
prevent  the  holder  of  the  note  containing  usury  from  getting 
judgment  on  the  note,  but  the  judgment  could  only  be  for  the 
principal  and  legal  interest.  The  legislature  in  1916  passed  an 
act  repealing  the  two  sections  of  the  Code  fixing  penalties  for 
charging  usurious  rates  of  interest,  and  enacted  in  lieu  thereof 
the  following: 


472  PARK'S  BANKING  LAW  of  GEORGIA. 

"Any  person,  company  or  corporation  violating  the  provisions 
of  §  3436  of  the  Code  of  1910  shall  forfeit  the  entire  interest  so 
charged  or  taken  or  contracted  to  be  reserved,  charged  or  taken." 

And  it  was  further  enacted  that 

"no  further  penalty  or  forfeiture  shall  be  occasioned,  suffered  or 
allowed  further  than  as  stipulated  in  Section  1  hereof."  Acts 
1916,  p.  48;  Park's  Ann.  Code,  Supp.  1917,  §§  3438,  3438(a), 
3442. 

Under  the  law  as  now  in  force,  the  only  penalty  for  charging 
usury  is  the  forfeiture  of  the  entire  interest  on  the  debt.  Titles 
taken  as  security  for  usurious  debts  are  valid  to  the  same  extent 
as  though  no  usury  had  been  exacted. 


Usury  in  Homestead  Waiver  Note  Will  Not  Relieve  Indorser 
Since  Act  of  1916. 

Under  the  Act  of  1916,  changing  the  penalty  for  usury,  would  a  personal 
indorser  or  an  accommodation  indorser  be  relieved  where  the  note  was 
tainted  with  usury? 

I  do  not  think  so.  The  reason  an  indorser  or  other  person 
secondarily  liable  on  a  note  tainted  with  usury  was  held  to  be  re- 
leased under  the  old  law  was  that  the  usury  voided  the  waiver 
of  homestead  contained  in  the  note,  and  as  the  waiver  was  void 
the  risk  of  the  surety  or  other  person  secondarily  liable  was 
increased.  The  Act  of  1916  repeals  §  3442  of  the  Code,  which 
made  all  titles  to  property  taken  as  a  part  of  usurious  contract  or 
to  evade  the  laws  against  usury  void.  This  section  having  been 
repealed,  the  waiver  of  homestead  is  good,  although  the  note  may 
be  tainted  with  usury,  and  consequently  the  surety's  risk  is  not 
increased,  and  he  would  be  liable  on  the  note. 


Clause  in  Note  That  Surety  or  Indorser  Knows  %That  More 
Than  8  Per  Cent.  Is  Charged  Is  of  No  Value  Since  Act  of 
1916. 

What  is  the  value  of  a  clause  in  a  note  to  the  effect  that  the  principal, 
surety,  guarantor  or  indorser  acknowledges  that  at  the  time  of  signing  the 
note  he  was  aware  that  more  than  8  per  cent,  per  annum  interest  was 
charged  ? 

Since  the  passage  of  the  Act  of  1916  I  do  not  think  there  is 
any  advantage  in  putting  the  clause  in  a  note.    The  homestead 


OPINIONS  OF  THE;  GENERAL  COUNSEL.  473 

waiver  would  be  perfectly  good  now  whether  usury  was  charged 
or  not,  and  as  the  surety  was  only  released  on  account  of  the  fact 
that  usury  rendered  void  the  homestead  waiver,  and,  therefore, 
increased  his  risk,  there  seems  to  be  no  longer  any  necessity  for 
such  a  provision. 


Renewal  of  Loan  Infected  with  Usury,  Though  at  Lawful 
Rate,  Is  Usurious. 

How  is  it  best  to  renew  loans  secured  by  deeds  or  bonds  for  title,  upon 
which  interest  at  8  per  cent,  was  added  to  the  face  of  the  paper,  making 
the  loan  usurious,  so  as  to  preserve  the  security? 

Any  renewal  which  includes  usury,  although  the  new  loan  is  at 
a  lawful  rate,  would  be  usurious. 

"A  renewal  of  a  contract  infected  with  usury  and  the  payment 
of  the  illegal  interest  to  the  date  of  renewal,  cannot  divest  the 
contract  of  its  taint.  Where  the  original  transaction  was  usuri- 
ous, the  usury  infects  all  the  securities  given  in  renewal  of  the 
same  debt,  however  varied  in  form  and  amount,  and  the  law  ap- 
plies all  payments  made  on  the  debt  to  the  principal  and  legal 
interest.  Archer  v.  McCray,  59  Ga.  546."  Lockwood  v.  Muhl- 
berg,  124  Ga.  660. 

While  this  is  true,  a  usurious  debt  can  be  paid  even  out  of  the 
proceeds  of  another  loan  made  to  the  same  party,  provided  it  is 
an  actual  payment  and  not  a  mere  cloak  to  cover  the  usury. 
Bates  v.  Harris,  112  Ga.  32. 

In  the  event  the  loan  is  not  paid,  but  simply  renewed,  care  must 
be  taken  to  purge  the  transaction  from  all  usury,  both  the  usury 
in  the  original  loan  and  in  any  renewal  thereof. 


Renewing    Debt,    Eliminating    Excessive    Interest,    Relieves 
Taint  of  Usury. 

Where  usury  has  been  charged  on  a  note,  and  the  note  is  renewed  with 
the  excess  interest  formerly  charged  eliminated,  the  new  transaction  con- 
taining no  usury,  could  the  maker  plead  usury  on  account  of  the  excess 
rate  having  been  originally  charged? 

I  do  not  think  so.    Indeed,  the  Supreme  Court  has  held  that : 

"If  one  who  owes  to  another  a  debt  infected  with  usury  obtains 
from  him  a  loan  of  money  at  a  lawful  rate  of  interest,  executes  a 
deed  to  secure  the  payment  of  this  loan,  and  out  of  the  proceeds 
thereof  actually  and  bona  fide  pays  off  the  old  debt,  the  deed  is 
not  void  for  usury ;  aliter,  if  the  transaction  as  a  whole  be  merely 


474  PARK'S  BANKING  LAW  of  GEORGIA. 

colorable  and  designed  as  a  cloak  to  cover  up  the  usury  in  the 
original  indebtedness."    Bates  v.  Harris,  112  Ga.  32. 

In  discussing  this  ruling,  Justice  Lumpkin  said : 

"A  debtor  has  an  undoubted  right  to  pay  a  debt  infected  with 
usury ;  and  if  he  actually  does  it,  that  debt  ceases  to  exist.  That 
the  payment  is  made  out  of  the  proceeds  of  a  loan  from  the  same 
creditor  upon  which  a  lawful  rate  of  interest  is  charged  cannot 
render  usurious  this  loan  or  a  deed  given  to  secure  it.  If  there  be 
no  actual  payment  of  the  old  debt,  and  the  amount  thereof  is 
simply  included  in  the  debt  secured  by  the  deed,  the  same  is 
usurious  and  therefore  void;  for  in  that  event,  the  transaction 
resulting  in  its  execution  is  merely  colorable,  and  obviously,  a 
cloak  designed  to  cover  up  the  usury." 

If  a  usurious  debt  can  be  paid  from  a  loan  of  money  subse- 
quently made,  there  would  seem  to  be  no  reason  why  a  debt  with- 
out the  usury  could  not  be  renewed  so  as  to  relieve  the  transac- 
tion of  its  original  taint. 


Note  Given  Since  Act  of  1916  in  Renewal  of  Usurious  Note 
Given  Before  Act,  Governed  by  New  Law. 

Where  a  new  note  is  given  since  the  passage  of  the  Act  of  1916 
in  payment  of  a  note  infected  with  usury  given  prior  to  that  Act,  is  it 
governed  by  the  old  law  or  the  new? 

Under  the  question  as  stated,  there  is  no  doubt  but  that  the  new 
note  would  be  governed  by  the  new  law.  When  the  old  note  is 
taken  up  and  cancelled,  the  taking  of  a  new  one  constitutes  a  new 
transaction,  though  given  in  settlement  of  the  old. 


Loan  Made  at  Legal  Rate  to  Pay  Usurious  Debt  to  Third 
Party  Is  Not  Infected  With  Usury. 

If  the  president  of  a  bank  individually  has  for  some  years  been  carry- 
ing a  note,  secured  by  real  estate,  on  which  there  was  usury  charged,  and 
he  should  decide  to  lend  the  borrower  funds  of  the  bank  to  take  up  the 
loan,  a  new  note  and  mortgage  being  given  to  the  bank  at  the  legal  rate, 
can  the  borrower  plead  usury  on  account  of  the  original  transaction? 

I  do  not  think  so.  The  Supreme  Court  in  the  case  of  Thomp- 
son v.  First  State  Bank  of  Dawson,  99  Ga.  651,  held  that: 

"Where  the  lender  of  money  neither  charges  nor  receives  any 
more  than  the  legal  rate  of  interest,  the  fact  that  the  money  was, 
with  his  knowledge,  borrowed  for  the  purpose  of  paying  a  debt 
infected  with  usury  due  by  the  borrower  to  a  third  person,  does 
not  make  the  loan  usurious." 


OPINIONS  of  THE  GENERAL  COUNSEL.  475 

Contract  Requiring  That  Part  of  8  Per  Cent.  Loan  Be  Kept 
on  Deposit  with  Lender  Makes  Loan  Usurious. 

Is  an  eight  per  cent,  loan  usurious  where  the  bank  requires  the  customer 
to  maintain  a  balance  equal  to  twenty-five  per  cent,  of  the  amount  of  the 
loan? 

In  the  case  of  Cooper  v.  National  Bank  of  Savannah,  the  Court 
of  Appeals  of  this  State  reviewed  the  authorities  on  the  subject 
and  quoted  approvingly  this  rule  from  the  American  &  English 
Encyclopedia  of  Law : 

"In  the  case  of  loans  or  discounts  by  a  bank  at  the  highest 
legal  rate  of  interest,  a  provision  that  the  proceeds  of  the  loan  or 
discount  or  any  part  thereof  shall  be  kept  as  a  deposit  in  the  bank 
during  the  period  or  a  portion  of  the  period  of  the  loan  renders 
the  transaction  usurious,  for  the  reason  that  the  borrower  thus 
pays  interest  on  money  which  he  does  not  receive  or  have  the  use 
of.  But  the  fact  that  the  borrower  voluntarily  allows  a  part  of 
the  loan  to  remain  on  deposit  with  the  banker,  without  any  agree- 
ment therefor,  will  not  constitute  the  giving  or  taking  of  usury, 
though  such  deposit  is  made  with  the  expectation  by  the  borrower 
that  he  will  thereby  be  enabled  to  obtain  further  loans  more 
readily." 

Other  authorities  are  quoted,  and  the  conclusion  is  definitely 
announced  that : 

"If  the  requirement  of  the  lender  that  the  borrower  should 
maintain  such  a  deposit  was  in  fact  merely  a  scheme  or  device  by 
which  the  usurious  intent  could  be  concealed,  then  the  transaction 
would  be  illegal,  whatever  its  form."  Cooper  v.  National  Bank 
of  Savannah,  21  Ga.  App.  356. 

This  expresses  clearly  the  law  on  the  subject. 


Advising   Customers  That  Rates  of  Interest  Are  Based  on 
Balances  Does  Not  Make  Loan  Usurious. 

If  in  a  general  way  a  bank  should  require  borrowers  to  carry  balances 
on  deposit  in  order  to  entitle  them  to  loans,  would  such  requirement 
cause  a  loan  made  under  such  conditions  to  be  regarded  as  usurious? 

I  do  not  think  that  a  general  requirement  that  borrowers  should 
carry  balances,  and  that  rates  of  interest  would  be  fixed  in  accord- 
ance with  such  balances,  would  be  sufficient  to  render  the  contract 
usurious,  although  a  rate  of  8  per  cent,  was  made  for  a  particular 
loan.  The  question  would  be  different  if  the  borrower  was  re- 
quired to  maintain  a  fixed  balance,  and  not  allowed  to  check 
against  that  balance,  or  was  not  permitted  to  reduce  his  balance 


476  PARK'S  BANKING  LAW  OF  GEORGIA. 

below  a  given  figure.  I  do  not  think  a  loan  would  be  considered 
usurious  where  a  bank  at  the  time  the  loan  is  made  advises  the 
customer  that  he  would  be  expected  to  carry  a  balance,  and  that 
in  consideration  of  his  doing  so  a  particular  rate  is  agreed  upon, 
even  though  the  loan  is  made  at  eight  per  cent. 


Commissions   Paid   to   Closely  Allied   Bank  for   Negotating 
Loan,  Would  Constitute  Usury. 

Where  a  savings  bank,  whose  charter  gives  it  the  right  to  negotiate  loans 
and  charge  a  commission,  is  operated  in  connection  with  a  national  bank, 
would  it  render  the  transactions  usurious  for  it  to  charge  a  commission  for 
handling  loans  made  by  the  national  bank? 

It  would  be  of  very  doubtful  propriety  to  charge  a  commission 
for  a  loan  negotiated  from  the  national  bank  with  which  the  sav- 
ings bank  is  connected;  and,  of  course,  if  the  national  bank  had 
any  interest,  directly  or  indirectly,  in  the  commission  charged,  the 
loan  would  be  usurious.  I  hardly  see  how,  where  one  of  the 
customers  of  the  national  bank  applied  for  a  loan,  it  could  nego- 
tiate the  loan  through  the  savings  bank  and  allow  the  savings 
bank  to  charge  a  commission.  Even  if  the  application  was  made 
in  the  first  instance  to  the  savings  bank,  it  certainly  seems  an 
evasion  of  the  usury  law  to  pay  the  savings  bank  a  commission 
for  negotiating  a  loan  with  its  own  officers  or  with  the  officers 
of  a  closely  allied  institution. 

The  Code  provides  that  where  the  lender  neither  takes  nor 
contracts  to  take  more  than  lawful  interest,  the  loan  is  not  ren- 
dered usurious  by  money  paid  or  agreed  to  be  paid  others  by 
the  borrower  in  order  to  obtain  the  loan.  Park's  Ann.  Code,  § 
3437.  But  if  the  commissions  are  shared  in  by  the  lender, 
the  loan,  of  course,  becomes  usurious.  With  two  banks  occupy- 
ing the  same  banking  house,  officered  by  the  same  people,  and 
closely  connected  in  every  way,  the  national  bank  would  have  a 
rather  difficult  task  to  show  that  the  commission  paid  was  for  any 
real  service  rendered  by  the  savings  bank  and  was  not  a  part  of 
the  interest  charged. 


OPINIONS  OP  THE  GENERAL  COUNSEL.  477 

Usury  Can  Be  Pleaded  Even  Against  Bona  Fide  Holder. 

The  payee  of  a  note  tainted  with  usury  sells  it  to  a  bank  for  the  amount 
of  the  principal  without  interest.  Can  the  borrower  plead  usury? 

The  Supreme  Court  has  held : 

"The  defense  of  usury  is  good  even  against  a  bona  fide  holder 
of  a  negotiable  promissory  note,  who  acquired  the  same  before  its 
maturity."  Atlanta  Savings  Bank  v.  Spencer,  107  Ga.  630. 

As  there  was  usury  in  the  original  transaction,  the  note  was 
given  for  an  illegal  consideration,  and  under  this  decision  usury 
could  be  pleaded  against  the  bank  even  if  it  is  a  bona  fide  holder. 
There  are  many  cases  to  the  same  effect.  See  Campbell  v.  Mor- 
gan, 111  Ga.  200;  Clark  v.  Havard,  111  Ga.  242;  Russell  v. 
Turner,  14  Ga.  App.  344;  Angier  v.  Smith,  101  Ga.  844. 


Debtor  May  Recover  Usury  Paid. 

As  usury  is  a  personal  plea,  if  the  borrower  does  not  avail  himself  of 
the  defense  of  usury  before  he  pays  a  note,  can  he  maintain  a  suit  for  the 
recovery  of  usury  paid? 

It  is  true  that  usury  is  a  personal  plea.  I  am  unable  to  see, 
however,  that  this  has  anything  to  do  with  the  question  whether  a 
debtor  can  recover  a  usurious  payment  after  it  has  been  made. 
When  the  law  says  that  usury  is  a  personal  plea,  it  means  simply 
that  nobody  but  the  debtor  can  plead  it. 

A  debtor  who  has  paid  a  note  can  recover  any  usurious  interest 
which  is  a  part  of  the  amount  paid.  This  is  covered  by  §  3436 
of  Park's  Ann.  Code,  which  provides  that  it  shall  not  be  lawful 
for  any  person  to  reserve,  charge  or  take  for  any  loan  or  ad- 
vance of  money  or  forbearance  to  enforce  the  collection  of  any 
sum  of  money,  any  rate  of  interest  greater  than  eight  per  cent., 
and  §  3438,  as  amended  by  the  Act  of  1916,  which  provides : 

"Any  person,  company  or  corporation  violating  the  provisions 
of  section  3436  shall  forfeit  the  entire  interest  so  charged  or  taken 
or  contracted  to  be  reserved,  charged,  or  taken."  Park's  Ann. 
Code,  Supp.,  §  3438. 

Section  3441  is  as  follows: 

"Any  plea  or  suit  for  the  recovery  of  such  forfeiture  shall  not 
be  barred  by  lapse  of  time  shorter  than  one  year." 

It  thus  appears  that  a  suit  can  be  maintained  for  the  recovery 
of  usury  which  has  been  paid  by  the  debtor.  The  only  limitation 


478  PARK'S  BANKING  LAW  OF  GEORGIA. 

upon  the  right  to  recover  is,  that  the  suit  for  the  recovery  must 
be  brought  within  one  year. 


A  State  Bank  in  Georgia  Can  Not  Discount  Paper  by  Reserv- 
ing Interest  at  the  Highest  Rate  Permitted  by  the  Georgia 
Statute. 

Can  a  state  bank  deduct  interest  in  advance  from  a  loan  made  at  the 
rate  of  eight  per  cent,  per  annum? 

The  question  has  been  decided  by  the  Supreme  Court  of 
Georgia : 

"The  reserving  of  interest  in  advance  by  a  bank  at  the  highest 
legal  rate  of  interest  on  a  loan,  whether  it  be  a  short  or  long  term 
loan,  is  usurious."  Loganville  Banking  Company  v.  Forrester, 
143  Ga.  302. 

Under  this  decision,  banks  organized  under  the  laws  of  Georgia 
can  not  deduct  interest  at  eight  per  cent,  in  advance  even  on  short 
time  loans. 

Section  19,  Article  19,  of  the  Banking  Act  of  1919,  §  163,  which 
authorizes  a  bank  to  charge  interest  at  not  exceeding  eight  per 
cent,  per  annum,  makes  no  change  in  the  law. 


Discount  of  Note  by  Third  Party  at  More  Than  Lawful  Rate 
Is  Not  Usurious. 

Where  a  promissory  note  is  sold  with  indorsement  by  the  payee  and 
the  discount  amounts  to  more  than  the  lawful  rate  of  interest,  is  the  trans- 
action usurious? 

The  precise  question  has  been  decided  by  the  Supreme  Court  of 
Georgia  in  the  case  of  Campbell  v.  Morgan,  111  Ga.  200,  from 
which  I  quote: 

"When  the  payee  of  a  negotiable  promissory  note  sold  it  out- 
right to  another,  the  mere  fact  that  the  seller  indorsed  the  paper 
did  not  place  him  in  the  attitude  of  a  borrower  of  money  from 
the  purchaser,  nor  as  between  the  latter  and  the  maker  of  the  note 
was  the  transaction  usurious,  because  the  discount  amounted  to 
more  than  the  maximum  lawful  rate  of  interest." 

I  also  quote  from  the  case  of  McCall  v.  Herring,  116  Ga.  242: 

"It  is  perfectly  clear  that  in  pure  discount  or  the  absolute  pur- 
chase by  one  of  the  promissory  note  of  another,  laws  relating  to 
usury  ought  not  to  apply,  for  the  reason  that  one  may  give  such 
a  price  in  the  purchase  of  a  promissory  note  of  an  individual  as 


OPINIONS  OF  THE  GENERAL  COUNSEL.  479 

he  may  see  fit,  just  as  he  may  for  a  horse  or  other  article  of  per- 
sonal property.  In  that  case  the  note  put  on  the  market  by  the 
maker  represents  property  which  the  makes  wishes  to  sell;  and 
if  one  choose  in  open  market  to  buy  it,  the  price  concerns  no  one 
except  the  owner  and  the  purchaser.  Such  a  transaction  is  not, 
however,  the  loan  of  money." 

It  should  be  borne  in  mind,  however,  that  the  National  Bank 
Act  prescribes  different  rules  with  regard  to  usury  so  far  as 
national  banks  are  concerned.  The  Supreme  Court  of  the  United 
States,  in  the  case  of  National  Bank  of  Gloversville  v.  Johnson, 
104  U.  S.  271,  26  L.  Ed.  742,  held : 

"A  national  bank  is  liable  at  the  suit  of  the  indorser  to  the 
penalties  imposed  by  §§  5197  and  5198  of  the  U.  S.  R.  S.  for 
discounting  business  paper  transferred  to  it  by  indorsement  im- 
posing the  ordinary  liability  upon  the  indorser,  at  a  greater  rate 
of  interest  than  seven  per  cent,  per  annum.  To  buy  or  purchase 
a  debt  is  always  in  commerce  termed  to  discount  it.  Discount  is 
the  difference  between  the  price  and  the  amount  of  the  debt." 

In  this  case  the  Supreme  Court  says  it  is  possible  that  the 
transfer  of  a  note  by  indorsement  may  be  distinguished  from 
cases  where  the  title  to  the  paper  is  transferred  by  indorsement 
without  recourse  or  by  mere  delivery.  The  court  decline  to  ex- 
press an  opinion  upon  such  a  transfer.  It  has  been  held,  however, 
by  a  number  of  the  State  courts  in  States  having  laws  substan- 
tially the  same  as  the  National  Bank  Act  on  the  subject  of  usury 
and  by  the  United  States  Circuit  Court  of  Appeals  for  the  Third 
Circuit,  "That  a  discount  without  indorsement  at  more  than  the 
lawful  rate  is  usurious."  I  quote  from  Danforth  v.  National 
State  Bank,  48  Fed.  Rep.  271,  a  case  decided  by  the  United  States 
Circuit  Court  of  Appeals  for  the  Third  Circuit : 

"The  purchase  of  accepted  drafts  by  a  national  bank  from  the 
holder  without  his  indorsement  at  a  greater  reduction  than  lawful 
interest  on  their  face  value  is  a  discounting  of  those  drafts,  within 
the  meaning  of  Rev.  St.  U.  S.,  §  5197,  which  prohibits  such  bank 
from  taking  interest  on  any  loan  or  discount  made  by  it  at  a 
greater  rate  than  is  allowed  by  the  laws  of  the  State  where  it  is 
situated." 

My  conclusion  is,  therefore,  that  a  State  bank  in  Georgia  may 
purchase  a  note  offered  to  it  at  any  price  which  the  seller  may 
agree  to  take  for  it,  and  whether  the  note  is  indorsed  or  trans- 
ferred without  recourse  or  merely  by  delivery,  the  transaction  is 
not  usurious;  but  a  national  bank  cannot  purchase  a  note  at  a 
greater  rate  of  discount  than  the  legal  rate  of  interest,  no  matter 
whether  it  is  transferred  by  indorsement,  without  recourse,  or 


480  PARK'S  BANKING  LAW  OF  GEORGIA. 

by  mere  delivery,  without  being  liable  for  the  penalties  provided 
by  the  National  Bank  Act  for  charging  usury. 


VOLUNTARY  DEED. 


Whether  Deed  Reciting  a  Nominal  Consideration  and  Love 
and  Affection  Is  Voluntary  Depends  on  Intention  of  the 
Parties. 

Is  a  deed  reciting  a  nominal  consideration  of,  say,  $5.00,  and  love  and 
affection,  to  be  regarded  as  a  deed  of  bargain  and  sale  for  a  valuable  con- 
sideration or  a  deed  of  gift?  The  question  being  important  for  the  reason 
that  a  married  woman  cannot  sell  her  property  to  her  husband  unless  the 
sale  be  approved  by  the  judge  of  the  Superior  Court,  but  she  can  make 
to  her  husband  a  valid  gift  of  her  property. 

The  rule  as  announced  by  the  Supreme  Court  in  the  case  of 
Shackelford  v.  Orris,  135  Ga.  29,  is: 

"Whether  a  deed  which  expresses  as  a  consideration  love  for 
the  grantee  and  a  small  sum  of  money  is  a  voluntary  conveyance 
depends  upon  the  intention  of  the  parties;  and  this  intention  is 
to  be  ascertained  by  an  inquiry  into  all  the  facts  and  circum- 
stances at  the  time  of  its  execution,  which  will  throw  light  upon 
the  question  as  to  whether  the  deed  was  executed  as  the  con- 
summation of  a  sale  or  as  the  evidence  of  a  gift.  Martin  v. 
White,  115  Ga.  866  (42  S.  E.  279)." 

To  the  same  effect  is  American  Insurance  Company  v.  Bagley, 
6  Ga.  App.  736. 


Voluntary   Deed,  Though   Recorded,   Void  as  Against  Pur- 
chaser Without  Notice. 

A  wife  makes  a  deed  of  gift  of  her  property  to  her  husband.  The  deed 
is  properly  recorded.  Subsequently  she  sells  the  property  to  a  bona  fide 
purchaser  who  has  no  actual  notice  of  the  deed  to  the  husband.  Which 
deed  is  superior,  that  of  the  husband  or  of  the  purchaser? 

Under  the  Georgia  law,  a  wife  may  not  sell  her  property  to  her 
husband  unless  the  sale  is  approved  by  an  order  of  the  Superior 
Court,  but  she  can  make  valid  a  gift  of  her  property  to  her  hus- 
band without  such  approval.  Park's  Ann.  Code,  §§  3009,  3010. 
But  a  voluntary  deed,  whether  made  by  a  married  woman  or  any 
other  person,  is  void  as  against  subsequent  bona  fide  purchasers 
for  value  without  notice.  This  notice  must  be  actual.  Con- 


OPINIONS  OF  THE  GENERAL  COUNSEL.  481 

structive  notice  by  the  record  of  the  deed  is  not  sufficient,  the 
registry  laws  only  applying  to  conveyances  based  upon  considera- 
tion. This  is  expressly  provided  by  §  4110,  Park's  Ann.  Code, 
and  as  said  by  Mr.  Justice  Cobb  in  Martin  v.  White,  115  Ga.  867 : 

"It  is  the  settled  law  of  this  State  that  a  voluntary  conveyance 
is  not  within  the  operation  of  the  laws  providing  for  the  registry 
of  deeds,  and  that,  therefore,  the  recording  of  such  a  conveyance 
is  not  notice  to  a  subsequent  purchaser  for  value." 

Therefore,  if  the  purchaser  had  no  notice  save  that  from  the 
record  of  the  prior  voluntary  deed  to  the  husband,  his  rights 
would  be  superior  to  such  deed. 


VOTING  BY  PROXY. 


Directors  Cannot  Vote  by  Proxy. 

Can  a  director  of  a  bank  vote  at  a  directors'  meeting  by  proxy? 

No;  the  directors  of  a  corporation  cannot  vote  at  a  directors' 
meeting  by  proxy,  but  must  be  personally  present  and  act  for 
themselves. 


WAREHOUSE  RECEIPTS. 


Transferee  or  Pledgee  of  Receipts  How  Far  Protected  Against 
Liens  on  Cotton  Stored. 

To  what  extent  is  the  holder  of  warehouse  receipts  pledged  as  collatera 
security  protected  against  liens  on  the  cotton? 

The  pledge  of  a  warehouse  receipt  as  security  for  a  loan  trans- 
fers to  the  pledgee  the  title  to  the  cotton  pledged,  the  holder  of  the 
receipt  standing  in  the  same  position  as  though  the  cotton  itself 
had  been  turned  over  to  and  was  held  by  him.  While  ordinarily 
the  delivery  of  personal  property  is  essential  to  its  pledge,  the 
Code  provides: 

"*  *  *  Promissory  notes  and  evidences  of  debt,  warehouse 
receipts,  elevator  receipts,  bills  of  lading,  or  other  commercial 
paper,  symbolic  of  property,  may  be  delivered  in  pledge."  Park's 
Ann.  Code,  §  3528. 

Construing  this  section,  the  Supreme  Court  has  held  that: 

"The  transfer  or  surrender  of  warehouse  receipts  or  other 
symbols  representing  cotton  may  very  properly  be  regarded  as 


482  PARK'S  BANKING  LAW  OF  GEORGIA. 

equivalent  to  an  actual,  physical  delivery  of  the  cotton  itself,  and, 
therefore,  will  operate  as  a  constructive  delivery  passing  title." 
Central  Company  v.  Exchange  Bank,  101  Ga.  353. 

And  quoting  again : 

"It  is  plainly  established  now  that  when  warehouse  receipts  for 
cotton  or  other  goods  are  delivered  in  pledge,  the  legal  effect  of 
such  delivery  is  to  put  in  the  possession  of  the  pledgee  the  prop- 
erty described  in  such  receipt."  Citizens  Banking  Company  v. 
Peacock,  103  Ga.  171. 

It  was  also  held  in  the  case  last  cited : 

"The  pledgee  of  a  warehouse  receipt  given  as  collateral  to 
secure  the  payment  of  a  debt  for  money  loaned  to  the  pledger, 
has  a  special  property  in  the  cotton  represented  by  such  ware- 
house receipt,  and  can  maintain  an  action  of  trover  against  the 
warehouseman  to  recover  the  cotton  represented  in  the  receipt, 
when  on  demand  the  latter  fails  or  refuses  to  deliver  the  cotton 
for  which  such  receipt  was  issued."  Citizens  Banking  Company  v. 
Peacock,  103  Ga.  171  (6). 

But  while  the  transfer  of  a  warehouse  receipt  puts  the  title  to 
the  cotton  in  the  transferee,  the  warehouse  receipt  is  not  such  a 
negotiable  instrument  as  that  a  bona  fide  holder  for  value  will  be 
protected  against  equities  and  claims  against  the  pledgor,  as  he 
would  be  in  the  case  of  a  promissory  note  or  other  negotiable  in- 
strument. In  other  words,  the  pledgeee  of  the  warehouse  receipt 
occupies  the  same  position  and  has  the  same  rights,  but  no  greater 
rights  than  he  would  if  the  cotton  itself  was  actually  delivered  to 
him.  This  is  well  expressed  by  the  Court  of  Appeals : 

"The  transfer  of  warehouse  receipts  and  similar  paper,  sym- 
bolic of  property,  operates  to  transfer  the  title  to  the  property 
when  it  is  so  intended,  but  it  gives  to  the  holder  of  the  receipt 
no  higher  rights  than  if  the  property  itself  had  been  physically 
transferred,  sold  or  delivered."  Booze  v.  Neal,  6  Ga.  App.  279. 

What,  then,  is  the  status  of  a  bona  fide  purchaser  of  cotton 
with  regard  to  liens  thereon?  It  has  been  repeatedly  held  that 
such  a  purchaser  of  personal  property,  without  notice  of  statu- 
tory liens  which  have  not  been  foreclosed,  takes  the  property 
freed  of  such  liens.  Quoting  from  a  few  of  the  cases : 

"A  bona  fide  purchaser  of  the  absolute  title  to  personal  prop- 
erty without  notice  of  any  unforeclosed  statutory  lien  upon  it 
takes  the  same  divested  of  any  such  lien.  Our  statutory  lien 
laws  secure  priority  of  judgment  to  favored  classes  of  debts  out 
of  certain  property  of  the  person  who  incurred  the  debts.  When 
such  property  passes  into  the  hands  of  a  bona  fide  purchaser  with- 
out notice  and  before  foreclosure,  it  is  no  longer  the  property  of 
the  person  incurring  the  debt,  and  not  having  gone  into  the  pos- 


OPINIONS  OF  THE  GENERAL  COUNSEL.  483 

session  of  one  affected  with  notice  the  lien  is  lost."     Frazer  v. 
Jackson,  46  Ga.  621. 

"A  bona  fide  purchaser,  without  notice,  of  a  crop  grown  on 
rented  premises  will  be  protected  against  the  lien,  general  or  spe- 
cial, of  the  landlord  for  rent."  Thornton  v.  Carver,  80  Ga.  397. 

And  to  the  same  effect :  Holmes  v.  Pye,  107  Ga.  784. 

"The  lien  of  a  laborer  on  the  property  of  his  employer  will  not 
prevail  against  a  purchaser  who  buys  before  foreclosure  of  the 
lien,  and  without  notice."  Beall  v,  Butler,  54  Ga.  43. 

And  it  has  been  held  that  a  warehouseman  who,  without  notice 
of  a  lien,  makes  advances  on  cotton  produced  on  rented  land  and 
stored  with  him  by  the  tenant  has  such  a  qualified  property  in  the 
cotton  as  to  entitle  him  to  reimbursement  for  such  advances  and 
pay  for  warehouse  charges  before  the  landlord  can  enforce  his 
claim  for  rent.  Clark  v.  Dobbins,  52  Ga.  656. 

The  transfer  of  a  bill  of  lading  issued  by  a  railroad  or  other 
carrier  transfers  the  title  to  the  property  shipped  and  covered  by 
the  bill  of  lading,  as  does  the  transfer  of  a  warehouse  receipt, 
and  it  has  been  several  times  held  that  the  title  of  the  transferee 
is  superior  to  subsequent  liens  against  the  transferrer  of  the  bill 
of  lading.  National  Bank  v.  Everett,  136  Ga.  372;  Farmers 
Bank  v.  Allen  Holmes  Co.,  122  Ga.  67 ;  American  National  Bank 
v.  Lee,  124  Ga.  863. 

Not  only  is  the  holder  of  a  warehouse  receipt  protected  against 
unforeclosed  statutory  liens  against  the  pledger,  of  which  he 
has  no  notice,  but  he  'has  a  qualified  title  to  the  property,  which 
can  not  be  affected  by  any  act  of  the  pledger  or  by  the  warehouse- 
man issuing  the  receipt.  I  quote  again  from  the  Court  of  Ap- 
peals : 

"The  pledgee  of  warehouse  receipts,  receiving  the  same  as  col- 
lateral upon  a  bona  fide  loan  or  discount  of  commercial  paper, 
stands  in  the  same  privileged  position  as  a  bona  fide  purchaser 
for  value  of  the  property  represented  by  the  receipts. 

"The  bona  fide  pledgee  for  value  of  a  warehouse  receipt  is 
vested  with  an  indefeasible  title  to  the  property,  of  which  the 
receipt  is  symbolic.  This  title  cannot  be  affected  or  incumberecl 
by  any  act  of  the  pledger  or  warehouseman,  and  is  subject  to  de- 
feasance only  by  the  payment  of  the  debt  secured  by  the  receipt. " 
Bank  of  Sparta  v.  Butts,  4  Ga.  App.  308. 

But  while  the  transferee  or  pledgee  of  the  warehouse  receipt 
is  protected  as  against  stautory  liens,  of  which  he  has  no  notice, 
and  while  the  pledger  cannot  defeat  his  title  by  any  subsequent 
act,  the  transferee's  title  is  subject  to  mortgages  and  other 


484  PARK'S  BANKING  LAW  OF  GEORGIA. 

recorded  liens  against  the  cotton  to  the  same  extent  as  though 
he  were  the  purchaser  of  the  cotton  itself,  although  he  may  have 
no  actual  knowledge  of  the  existence  of  such  mortgages,  the 
record  being  notice  thereof. 

A  growing  crop  may  be  mortgaged  in  Georgia.  Stephens  a 
Tucker,  55  Ga.  544.  Indeed,  mortgages  on  crops  given  to  secure 
the  payment  of  debts  for  money,  supplies,  and  other  articles  of 
necessity,  including  live  stock,  to  aid  in  making  and  gathering 
such  crops,  are  favored  under  our  Code,  and  are  superior  even 
to  judgments  of  older  date  than  such  mortgages,  and  this  is  so 
whether  they  are  recorded  or  not.  Park's  Ann.  Code,  §  3349; 
Franklin  v.  Callaway,  120  Ga.  382. 

Where  a  mortgage  is  given  on  a  crop  and  duly  recorded,  the 
mortgage  creditor  would  have  the  right  to  follow  the  cotton  into 
the  hands  of  a  purchaser,  the  record  of  his  mortgage  being  con- 
structive notice,  and,  therefore,  preventing  the  purchaser  from 
being  such  a  bona  fide  purchaser  as  that  he  would  take  the  prop- 
erty freed  of  the  lien.  Not  only  has  the  owner  of  a  crop  the  right 
to  mortgage  it,  but  even  a  cropper,  or  one  cultivating  the  crop 
on  shares,  has  a  mortgagable  interest  in  the  crops  which  he  is 
cultivating,  and  any  purchase  of  the  crop  would  be  subject  to  the 
lien  of  a  mortgage  given  by  a  cropper.  Fountain  v.  Fountain,  7 
Ga.  App.  361. 

In  the  case  last  cited,  it  was  also  held  that  an  unrecorded  mort- 
gage on  a  growing  crop  made  by  a  cropper  could  not  be  defeated 
by  applying  the  mortgage  property  to  an  indebtedness  existing  at 
the  time  the  mortgage  was  made,  even  though  with  the  consent 
of  the  tenant  and  to  one  without  actual  notice  of  the  mortgage. 
The  court  saying : 

"The  general  rule  is  that  one  who  takes  property  in  discharge 
of  an  existing  indebtedness  is  not  regarded  as  a  purchaser  for 
value,  and  it  is  only  as  to  such  a  purchaser  that  an  unrecorded 
mortgage  on  personalty  is  invalid." 

Again,  a  judgment,  where  properly  entered  on  the  general  exe- 
cution docket,  is  a  lien  on  all  the  property  of  the  defendant,  both 
real  and  personal.  Park's  Ann.  Code,  §  5946. 

As  a  defendant  could  not  sell  his  cotton  freed  of  the  lien,  he 
could  not  pledge  a  warehouse  receipt  for  the  cotton,  so  as  to  give 
to  the  pledgee  title  to  the  cotton  superior  to  the  judgment. 
::It  should  be  remembered,  too,  that  a  warehouse  receipt  is  only 
a  symbol  of  the  property  covered  by  it,  and  that  the  transfer  of 
such  receipt  is  mere  constructive  delivery  of  the  property,  and, 


OPINIONS  OF  THE  GENERAL  COUNSEL.  485 

therefore,  where  there  can  be  no  actual  delivery  of  the  property, 
because  it  is  not  then  in  the  warehouseman's  possession,  the  con- 
structive delivery  will  not  suffice  to  transfer  title.  Livingston  v. 
Anderson,  2  Ga.  App.  274;  Commercial  Bank  v.  Flowers,  116  Ga. 
219. 

Except  as  to  negotiable  instruments,  a  seller  can  convey  no 
better  title  than  he  has  himself.  Park's  Ann.  Code,  §  4118. 
Therefore,  the  transfer  of  a  warehouse  receipt  covering  stolen 
cotton,  or  other  cotton  to  which  the  depositor  has  no  title,  will 
not  convey  title  to  the  transferee. 

Under  our  statute,  cotton,  corn,  rice  and  other  products  sold 
by  planters  and  commission  merchants  on  cash  sale,  do  not  be- 
come the  property  of  the  buyer  until  fully  paid  for,  although  they 
may  have  been  delivered  to  the  buyer.  Park's  Ann.  Code,  §  4126. 
And  the  Supreme  Court  has  held  under  this  section : 

"Under  the  law  oi  this  State,  where  there  is  a  delivery  of 
cotton  by  a  planter  or  commission  merchant  'on  cash  sale,'  the 
title  of  the  seller  remains  undivested  until  payment  in  full  of  the 
purchase  price,  and  may  be  asserted  by  him  even  as  against  a  bona 
fide  purchaser  from  his  vendee."  Flannery  v.  Harley,  117  Ga. 
483. 

To  summarize:  The  pledgee  or  transfee  of  a  warehouse  re- 
ceipt is  regarded  as  a  bona  fide  holder  of  the  property  covered  by 
the  receipt.  His  title  can  not  be  affected  by  any  subsequent  claims 
or  liens  against  the  pledger  or  transferrer  or  by  any  act  of  the 
pledgor  or  of  the  warehouseman  issuing  the  receipt.  His  title  is 
superior  to  statutory  liens,  such  as  the  general  or  special  Hen  of 
landlords  for  rent  or  for  supplies  furnished,  the  liens  of  laborers, 
or  other  liens  of  similar  character,  but  it  is  inferior  to  a  duly  re- 
corded mortgage  or  bill  of  sale  to  secure  debt,  and  to  judgments 
where  properly  entered  on  the  general  execution  docket.  The 
transferee  or  pledgee  of  a  warehouse  receipt  gets  no  title  as 
against  the  true  owner  of  the  property  covered  by  the  receipt, 
where  the  property  has  been  stolen,  or  in  the  case  of  farm  prod- 
ucts sold  by  farmers  or  commission  merchants,  where  it  has  been 
sold  for  cash  and  not  paid  for. 


486  PARK'S  BANKING  LAW  OF  GEORGIA. 

Cotton  Levied  On  Under  Judgment  Against  Tenant  or 
Cropper — Rights  of  Parties. 

A  landlord  secures  a  loan  from  a  bank,  pledging  as  collateral  ware- 
house receipts  for  cotton,  the  receipts  being  issued  jointly  to  the  landlord 
and  tenant.  A  common  law  fi.  fa.  against  the  tenant  is  levied  on  the  cotton 
covered  by  the  warehouse  receipts,  the  judgment  creditor  claiming  that  one- 
half  of  the  cotton  belongs  to  the  tenant.  What  are  the  relative  rights  of  the 
bank,  the  warehouseman,  and  the  judgment  creditor? 

The  question  depends  largely  on  whether  the  person  designated 
as  tenant  was  a  tenant  or  a  cropper.  Under  the  Code : 

"Where  one  is  employed  to  work  for  part  of  the  crop  the  rela- 
tion of  landlord  and  tenant  does  not  arise.  The  title  to  the  crop, 
subject  to  the  interest  of  the  cropper  therein,  and  the  possession 
of  the  land  remain  in  the  owner."  Park's  Ann.  Code,  §  3707 : 

The  Code  also  provides : 

"Whenever  the  relation  of  landlord  and  cropper  exists,  the  title 
to  and  right  to  control  and  possess  the  crops  grown  and  raised 
upon  the  lands  of  the  landlord  by  the  cropper,  shall  be  vested  in 
the  landlord  until  he  has  received  his  part  of  the  crops  so  raised 
and  is  fully  paid  for  all  advances  made  to  the  cropper  in  the 
year  said  crops  were  raised  to  aid  in  making  said  crops."  Park's 
Ann.  Code,  §  3705. 

A  judgment  or  lien  against  the  cropper  cannot  be  levied  on  his 
part  of  the  crop  until  the  landlord  has  been  paid.  Therefore,  if  in 
the  case  under  consideration  this  cotton  was  raised  by  a  cropper, 
and  there  has  been  no  final  settlement  between  the  landlord  and 
the  cropper,  and  no  final  division  of  the  crop,  the  judgment 
against  the  cropper  cannot  be  levied  on  the  cotton,  and  the  land- 
lord, or  the  bank,  as  the  holder  of  the  warehouse  receipts  which 
carry  with  them  the  title  to  the  cotton  could  claim  the  cotton  and 
defeat  the  judgment  creditor  of  the  cropper.  If,  on  the  other 
hand,  the  relation  of  landlord  and  tenant  existed,  the  title  to  the 
tenant's  part  of  the  crop  would  vest  in  him  and  not  in  the  land- 
lord, and  if  any  part  of  the  cotton  covered  by  the  warehouse  re- 
ceipts belonged  to  the  tenant  it  would  be  subject  to  levy  and  sale 
for  the  tenant's  debts.  Of  course,  the  landlord,  if  he  has  not 
been  paid  his  rent  for  the  year,  could  protect  himself  by  suing  out 
a  distress  warrant  and  foreclosing  a  lien,  the  landlord's  lien  for 
rent  on  the  crops  raised  on  the  lands  being  superior  to  judgment 
liens  against  the  tenant.  Park's  Ann.  Code,  §  3701. 

The  bank  as  the  holder  of  the  warehouse  receipts  is  in  the  same 
position  as  though  it  held  the  cotton  itself,  the  Code  recognizing 
the  right  to  pledge  warehouse  receipts,  and  it  having  frequently 
been  held  that  the  pledgee  of  warehouse  receipts  is  a  bona  fide 


OPINIONS  OF  THE  GENERAL  COUNSEL,.  487 

holder  of  the  property  covered  by  the  receipts.    As  stated  by  the 
Supreme  Court: 

"The  transfer  or  surrender  of  warehouse  receipts,  or  other 
symbols  representing  cotton,  may  very  properly  be  regarded  as 
equivalent  to  an  actual  physical  delivery  of  the  cotton  itself,  and, 
therefore,  will  operate  as  a  constructive  delivery  passing  title." 
Central  Company  v.  Exchange  Bank,  101  Ga.  353. 

I  do  not  think  that  the  warehouseman  has  any  particular  in- 
terest in  this  controversy.  To  the  extent  of  the  storage  charges, 
or  actual  advances  made  against  the  cotton,  the  warehouseman's 
lien  would  be  superior  to  the  judgments  against  either  the  land- 
lord or  the  cropper,  or  the  tenant  as  the  case  may  be. 


The  Phrase  "Customary  Charges  and  Advances"  Does  Not 
Include  Advances  Made  by  Warehouseman. 

A  warehouse  receipt  has  in  it  the  clause,  "deliverable  on  the  payment  of 
all  customary  charges  and  advances."  When  the  receipt  is  hypothecated 
with  a  bank,  can  the  warehouseman  hold  the  cotton  for  past  advances, 
and  continue  to  advance  on  it,  though  the  party  storing  the  cotton  does  not 
present  the  receipt  or  have  the  advances  noted  thereon? 

The  warehouseman  under  the  circumstances  cannot  hold  the 
cotton  as  against  the  bank,  if  nothing  more  appears  on  the  face  of 
the  receipt  than  the  clause  quoted.  This  precise  question  has 
been  decided  by  the  Court  of  Appeals  of  Georgia,  from  whose 
decision  I  quote: 

"The  title  to  property  represented  by  warehouse  receipts  be- 
comes vested  in  the  bona  fide  pledgee  for  value,  and  this  title 
cannot  be  defeated  or  incumbered  by  any  act  of  the  warehouse- 
man, nor  by  any  act  of  the  pledger.  The  pledgee  has  not  only  a 
lien  on  the  property  represented  by  the  receipt,  for  his  advances, 
but  he  has  an  absolute  title  to  the  property,  which  is  indefeasible 
except  by  payment  of  the  debt. 

"It  is  contended  in  this  case  that  the  statement  in  the  warehouse 
receipt,  that  the  cotton  which  it  represents  is  only  deliverable  to 
the  holder  of  the  receipt  on  payment  of  "customary  charges  and 
all  advances,"  is  sufficient  to  put  anyone  who  takes  it  on  notice 
that  any  advance  made  on  the  cotton  will  have  to  be  paid  be- 
fore the  cotton  can  be  demanded.  These  general  words  are 
printed  in  the  receipt  with  a  blank  space  left  for  the  statement  of 
the  amount  of  the  advances ;  and  in  the  present  case  no  amount 
is  inserted  in  the  receipts.  We  think  that  where  warehouse  re- 
ceipts containing  these  words  are  pledged  as  collateral  security, 
they  do  not  convey  notice  to  the  pledgee  that  any  advances  have 
in  fact  been  made,  or  that  the  pledgee  would  be  required  to  pay 


488  PARK'S  BANKING  LAW  OF  GEORGIA. 

any  advances  which  may  have  been  made  or  will  be  made  on  the 
cotton  represented  by  the  receipts.  If,  when  the  pledgee  took  the 
receipt  as  collateral,  it  contained  a  definite  statement  that,  in  addi- 
tion to  the  customary  charges,  such  as  storage  and  insurance,  a 
certain  sum  stated  had  been  advanced  to  the  pledger,  on  the 
cotton,  the  pledgee  would  take  it  subject  to  that  advance.  It  was 
the  duty  of  the  warehouseman,  when  he  issued  the  receipt,  if  he 
had  made  an  advance  to  the  owner  of  the  cotton  at  that  time,  to 
so  state  in  the  body  of  the  receipt ;  and  if  he  subsequently  ad- 
vanced to  the  owner  any  money  for  supplies,  on  the  cotton  in  his 
possession  as  warehouseman,  he  should  have  required  the  produc- 
tion of  the  receipt  and  have  entered  thereon  a  statement  of  such 
advance.  Any  other  rule  would  render  warehouse  receipts 
worthless  as  collateral  security.  It  would  enable  the  pledger  and 
the  warehouseman  to  perpetrate  a  fraud  on  the  pledgee,  against 
which  he  would  have  no  protection.  A  mere  inquiry  made  by  the 
pledgee  of  the  pledger,  at  the  time  of  the  pledge,  as  to  the  fact 
of  advances  would  furnish  no  protection  to  the  pledgee ;  and  to 
require  that  the  pledgee  should  go  to  the  warehouseman  and  in- 
quire as  to  the  fact  of  advances  would  be  wholly  unreasonable. 
The  receipt  itself  should  bear  upon  its  face  the  definite  expression 
of  the  fact  of  advances.  If  advances  have  been  made,  it  should 
so  state  specifically ;  and  if  not  so  stated,  the  pledgee  is  pro- 
tected. Of  course,  after  the  pledgee  obtains  possession  of  the  re- 
ceipts, the  title  to  the  property  thereby  represented  is  in  him,  and 
cannot  be  incumbered  by  any  act,  as  before  stated,  of  the  ware- 
houseman or  the  pledger."  Bank  of  Sparta  v.  Butts,  4  Ga.  App. 
308,  311,  312. 

I  think  this  covers  very  clearly  the  question.  It  should  be  noted 
that  under  this  decision  such  a  general  statement  in  the  receipt 
covers  charges  necessary  to  the  protection  of  the  property,  such  as 
storage  and  insurance,  but  it  covers  nothing  else. 


Right  of  Pledgee  of  Warehouse  Receipt  to  Sell  Property 
Covered  Thereby. 

Is  a  bank  which  holds,  as  collateral  security  for  advances  made  for  the 
purchase  of  cotton,  warehouse  receipts  for  the  cotton  purchased,  author- 
ized to  sell  the  cotton  so  held  in  pledge  in  the  absence  of  a  special  contract 
giving  it  such  right? 

Under  §  3528,  Park's  Ann.  Code,  warehouse  receipts,  bills  of 
lading,  and  similar  paper  symbolic  of  property,  may  be  delivered 
in  pledge,  the  delivery  of  the  receipt  placing  the  holder  in  the 
same  position  as  though  the  cotton  itself  had  been  delivered  to 
him.  But  a  pledgee  has  no  right  to  sell  the  property  pledged  until 
after  the  debt  for  which  it  is  pledged  becomes  due,  and  he  must 


OPINIONS  OF  THE  GENERAL  COUNSEL.  489 

always  give  notice  for  thirty  days  to  the  pledger  of  his  intention 
to  sell,  and  the  sale  must  be  in  public  and  to  the  highest  bidder. 
§  3530,  Park's  Ann.  Code. 

These  sections  have  been  held  by  the  Supreme  Court  to  apply 
to  the  holder  of  warehouse  receipts  as  collateral.  Citizens  Bank- 
ing Co.  v.  Peacock,  103  Ga.  171,  179. 

Therefore,  in  the  absence  of  a  special  contract  authorizing  the 
sale  of  the  cotton,  a  bank  holding  warehouse  receipts  as  collateral 
would  have  to  wait  the  maturity  of  its  debt  before  selling,  and 
could  only  sell  then  after  thirty  days'  notice,  and  the  sale  would 
have  to  be  at  public  outcry  to  the  highest  bidder.  Banks  usually 
avoid  this  by  taking  a  collateral  form  note  which  authorizes  the 
sale  of  the  collateral  in  the  event  the  maker  of  the  note  fails  when 
called  on  to  deposit  additional  collateral.  Many  of  the  banks  have 
a  special  cotton  contract,  which  provides  that  a  definite  margin  of 
so  many  dollars  per  bale  shall  be  maintained,  and  in  the  event 
such  margin  is  not  maintained  the  bank  has  the  right  to  sell  the 
cotton  at  private  sale  and  without  notice  to  the  pledger. 


YEAR'S  SUPPORT. 


Year's  Support  Is  Superior  to  Claim  of  Creditor  on  Collateral 

Pledged. 

Is  the  year's  support  allowed  to  a  widow  and  minor  children  out  of  the 
property  of  the  deceased  husband  and  father  superior  to  the  claim  of  a 
creditor  on  collateral  security  pledged  for  the  payment  of  a  promissory 
note  or  other  indebtedness? 

Yes ;  this  has  been  distinctly  ruled  by  the  Supreme  Court  in  the 
case  of  Ullman  v.  Brunswick  Title  Guarantee  &  Loan  Co.,  96 
Ga.  625. 

It  is  also  superior  to  the  claim  of  a  mortgage  creditor.  Cully  v. 
Bloomingdale,  68  Ga.  756. 


Year's  Support  Is  Inferior  to  Deed  to  Secure  Debt. 

Is  a  deed  to  secure  debt  under  section  3306,  et  seq.,  of  the  Code  of  1910, 
good  as  against  a  claim  for  year's  support,  where  no  bond  for  title,  as 
provided  for  in  that  section,  is  given? 

The  precise  question  has  been  decided  by  the  Supreme  Court 
in  the  case  of  Williamson  v.  Orient  Insurance  Company,  100  Ga. 
791,  from  which  I  quote  the  first  headnote : 


490  PARK'S  BANKING  LAW  OF  GEORGIA. 

"Though  a  deed  to  realty  purporting  upon  its  face  to  have 
been  made  for  the  purpose  of  securing  a  debt,  and  reciting  that 
it  was  executed  under  the  provisions  of  §  1969  of  the  Code  of 
1882  (Code  of  1910,  §  3306)  did  not  fall  strictly  within  the  pro- 
visions of  that  section,  for  the  reason  that  there  was  no  bond  to 
reconvey  upon  the  payment  of  the  debt,  yet  if  such  deed  by  its 
express  terms  conclusively  manifested  an  intention  on  the  part 
of  the  maker  to  pass  title  to  the  grantee  and  contained  no  defeas- 
ance clause  or  other  language  authorizing  it  to  be  construed  as  a 
mortgage  only,  the  mere  reference  in  the  deed  to  the  section  above 
mentioned  and  the  grantee's  failure  to  execute  and  deliver  to  the 
grantor  a  bond  for  titles  did  not  affect  the  efficiency  or  validity 
of  the  paper  as  an  instrument  passing  title  but  its  effect  was  to 
pass  title  to  the  grantee." 

As  a  year's  support  can  only  be  set  apart  out  of  property  the 
title  to  which  is  in  the  husband  and  father,  and  as  title,  as  held  by 
the  Supreme  Court,  is  in  the  creditor,  the  grantee,  and  not  in  the 
grantor  in  the  deed  to  secure  debt,  no  year's  support  can  be 
set  apart  out  of  the  property.  A  year's  support  is  superior  to 
a  mortgage,  but  this  is  because  a  mortgage  in  Georgia  does  not 
convey  title  but  is  only  a  lien.  A  year's  support  is  superior  to  a 
lien,  but  cannot  be  taken  in  property,  title  to  which  has  been  con- 
veyed, though  only  as  security  for  a  debt. 


TABLE  OF  CASES  CITED  IN  THE 
OPINIONS. 

Page 

Ainsworth  v.  Mobile,  Etc.,  Co.,  102  Ga.  123 404 

Allen  v.  Lathrop,  46  Ga.  133 384 

American  Insurance  Co.  v.  Bagley,  6  Ga.  App.  736 480 

American  Mortgage  Co.  v.  Walker,  119  Ga.  341 358 

American  National  Bank  v.  Lee,  124  Ga.  863  483 

American  National  Bank  of  Nashville,  Tenn.,  v.  Miller,  185  Fed.  339  271 

Angier  v.  Smith,  101  Ga.  844 477 

Apple  v .  Lesser,  93  Ga.  751 429 

Archer  v.  Guill,  67  Ga.  195,  200 359 

Archer  v.  McCray,  59  Ga.  546 473 

Atlanta  National  Bank  v.  Burke,  81  Ga.  589  226,  288 

Atlanta  Savings  Bank  v.  Spencer,  107  Ga.  630 477 

Averback  v.  Spivey,  122  Ga.  18  339 

Baggett  v.  Edwards,  126  Ga.  463 412 

Bagley  v.  Columbus  Southern  Railway  Co.,  98  Ga.  626 318 

Bailey  v.  Baker  Ice  Machine  Co.,  239  U.  S.  268,  60  L.  Ed.  275 235 

Bailie  v.  Augusta  Savings  Bank,  95  Ga.  277 302 

Bank  v.  Bangs,  106  Mass.  441  258 

Bank  of  Commerce  v.  Barrett,  38  Ga.  126 397 

Bank  of  Culloden  v.  Bank  of  Forsyth,  120  Ga.  575  243 

Bank  of  Lawrenceville  v.  Rockmore,  129  Ga.  582  408, 409 

Bank  of  Pittsburgh  v.  Neal,  22  How.  107,  16  L.  Ed.  328  292 

Bank  of  Richland  v.  Nicholson,  120  Ga.  622 415 

Bank  of  Sparta  v.  Butts,  4  Ga.  App.  308  483,  488 

Barnes  v.  Carter,  114  Ga.  886,  889 ;  s.  c.,  120  Ga.  895,  897 349 

Barrow  v.  E.  Tris  Napier  Co.,  16  Ga.  App.  309 232 

Bates  v.  Harris,  112  Ga.  32  473,  474 

Baxendale  v.  Bennett,  L.  R.  3  Q.  B.  D.  525 292 

Beall  v.  Butler,  54  Ga.  43  483 

Bedford  Bank  v.  Acoam,  125  Ind.  584,  25  N.  E.  713,  9  L.  R.  A.  560, 

21  Am.  St.  Rep.  258  442 

Betts-Evans  Co.  v.  Bass,  2  Ga.  App.  718 232 

Bishop  v.  Mathews,  109  Ga.  790 445 

Blackshear  Manufacturing  Co.  v.  Stone,  8  Ga.  App.  661 404 

Booze  v.  Neal,  6  Ga.  App.  279 482 

Brennan  v.  Merchants  and  Manufacturers  Bank,  62  Mich.  343,  28  N. 

W.  881  270 

Brimberry  v.  Mansfield,  86  Ga.  792 364 

Brobston  v.  Penniman,  97  Ga.  527 456 

Bromley  v.  Commercial  National  Bank,  9  Phila.  522  265 

Brown's  Estate,  113  Iowa  351,  86  N.  W.  617 249 

Bunn  v.  Commercial  Bank,  98  Ga.  647 223 

491 


492  TABLE  OF  CASES  CITED. 

Page 

Burkhalter  v.  Perry,  127  Ga.  438  229 

Burney  Tailoring  Co.  v.  Cuzzort,  132  Ga.  852 242 

Butler  v.  Frank,  7  Ga.  App.  655 351 

Butts  County  v.  Jackson  Banking  Co.,  129  Ga.  801  311 

California  National  Bank  v.  Kennedy,  167  U.  S.  362,  42  L.  Ed.  198. .  391 
California    National    Bank   v.   Utah    National    Bank,    190   Fed.    318 

(8  C.  C.  A.)    305 

Campbell  v.  Morgan,  111  Ga.  200  477,  478 

Campbell  v.  Trunnell,  67  Ga.  518  380 

Central  Co.  v.  Exchange  Bank,  101  Ga.  353  482,  487 

Chastain  v.  Peak,  111  Ga.  889  378 

Chatham  Bank  v.  Brobston,  99  Ga.  801  454 

City  National  Bank  v.  Gunter,  67  Kan.  227,  72  Pac.  842  398 

City  of  Macon  v.  First  National  Bank,  59  Ga.  648  463 

City  of  Macon  v.  Jones,  67  Ga.  489 466 

City  of  Macon  v.  Macon  Savings  Bank,  60  Ga.  133 462 

Citizens  Banking  Co.  v.  Peacock,  103  Ga.  171 482,  489 

Clark  v.  Dobbins,  52  Ga.  656  483 

Clark  v.  Havard,  111  Ga.  242  477 

Coaling  Coal  Co.  v.  Howard,  130  Ga.  807  229 

Coder,  Trustee,  v.  Arts,  213  U.  S.  223,  53  L.  Ed.  772  298 

Comer  v.  Dufour,  95  Ga.  376  304 

Commonwealth  v.  Felton,  101  Mass.  204  391 

Commonwealth  v.  Ketner,  92  Pa.  St.  372  391 

Commercial  Bank  v.  Flowers,  116  Ga.  219  485 

Continental  &  Commercial  Tr.  &  Sav.  Bank  v.  Chicago  Title  &  Tr. 

Co.,  229  U.  S.  434,  57  L.  Ed.  1268 236,  438 

Cooper  v.  National  Bank  of  Savannah,  21  Ga.  App.  356  393,  475 

Crine  v.  Tifts,  65  Ga.  644  320 

Critten  v.  Chemical  National  Bank,  171  N.  Y.  219,  57  L.  R.  A.  529  . .  275 

Cully  v.  Bloomingdale,  68  Ga.  756 489 

Cunningham  v.  Cureton,  96  Ga.  489  338 

Danforth  v.  National  State  Bank,  48  Fed.  271  479 

Danvers  v.  Salem  Bank,  151  Mass.  280,  24  N.  E.  44  261 

Davenport  v.  State  Banking  Co.,  126  Ga.  136 440 

Davis  v.  Baker,  71  Ga.  33  352 

Dawson  Water  Works  Case,  106  Ga.  696  373 

Detwiler  v.  Commonwealth,  18  Atl.  990 243 

Dickinson  v.  Leominster  Savings  Bank,  152  Mass.  51,  25  N.  E.  12..  324,  325 

Dight  v.  Chapman  (D.  C.  Oregon),  12  Am.  B.  R.  743 454 

District  of  Columbia  v.  Cornell,  130  U.  S.  655,  32  L.  Ed.  1041 293 

Dobbins  v.  Blanchard,  94  Ga.  500 380 

Dotterer  v.  Pike,  60  Ga.  42 359 

Dougherty  v.  Western  Bank  of  Ga.,  13  Ga.  288 402 

Dunbar  v.  Mize,  53  Ga.  439  359 

Earle  v.  Pennsylvania,  178  U.  S.  449,  44  L.  Ed.  1146 340 

Easton  v.  State  of  Ohio,  188  U.  S.  220,  47  L.  Ed.  452 391 


OF  CASES  CITED.  493 

Page 

Edalgo  v.  Southern  Ry.  Co.,  129  Ga.  258 347 

Empire  Cotton  Oil  Co.  v.  Continental  Gin  Co.,  21  Ga.  App.  16 338 

Eng.  Amer.  L.  &  T.  Co.  v.  Hiers,  112  Ga.  823 456 

Equitable  Loan  &  Security  Co.  v.  Lewman,  124  Ga.  190 358 

Equitable  Mortgage  Co.  v.  Butler,  105  Ga.  555  358 

Espy  v.  First  National  Bank,  18  Wall.  604,  21  L.  Ed.  947 275 

Evans,  Receiver,  v.  National  Bank  of  Savannah,   (U.  S.),  34  Sup. 

Ct.  58,  64  L.  Ed.  69 393 

Farmer  v.  Bank,  107  N.  W.  170   398 

Farmers  &  Traders  Bank  v.  Eubanks,  2  Ga.  App.  839 381 

Farmers  Bank  v.  Allen  Holmes  Co.,  122  Ga.  67 483 

Farmers  Bank  v.  Johnson,  King  &  Co.,  134  Ga.  486  273,  336 

Fifth  National  Bank  v.  Ashworth,  (Pa.),  2  L.  R.  A.  491 303 

First  National  Bank  v.  Owens,  147  Ga.  599  313 

First  National  Bank  v.  Whitman,  94  U.  S.  343,  24  L.  Ed.  229 409 

First  National  Bank  of  Trinidad  v.  First  National  Bank  of  Denver, 

Fed.  Cases,  No.  4810 306,  307 

First  National  Bank  of  Youngstown  v.  Hughes,  6  Fed.  737 465 

Flannery  v.  Harley,  117  Ga.  483  485 

Forsyth  Manufacturing  Co.  v.  Castlen,  112  Ga.  199  320 

Foster  v.  Chase,  75  Fed.  797 382 

Fountain  v.  Fountain,  7  Ga.  App.  361  484 

Fourth  National  Bank  v.  Mayer,  89  Ga.  108  261 

Franklin  v.  Callaway,  120  Ga.  382  484 

Frazer  v.  Jackson,  46  Ga.  621  483 

Garmany  v.  Lawton,  124  Ga.  876 368 

Ga.  Pacific  Ry.  Co.  v.  Strickland,  80  Ga.  776  358 

Ga.  R.  R.  &  Banking  Co.  v.  Love  and  Good  Will  Society,  85  Ga. 

293    257,  258 

Georgia  Seed  Co.  v.  Talmadge,  96  Ga.  254 436 

Germania  National  Bank  v.  Case,  99  U.  S.  628,  25  L.  Ed.  448 454 

Gordon  v.  Lansing  State  Savings  Bank,  133  Mich.  143,  94  N.  W.  741  283 

Green  v.  Equitable  Mortgage  Co.,  107  Ga.  536  329 

Gregory  v.  Sturgis  National  Bank,  71  S.  W.  66  *  354 

Griffith  v.  Collins,  116  Ga.  420 241 

Grissom  v.  Com.  Nat.  Bank,  87  Tenn.  350,  10  S.  W.  774,  3  L.  R.  A. 

273,  10  Am.   St.  Rep.  669   443 

Gross  v.  Whitely,  128  Ga.  79,  57  S.  E.  94 379 

Guarantee  Co.  of  N.  A.  v.  East  Rome  Town  Co.,  96  Ga.  511  331, 448 

Guilford  v.  Stacer,  53  Ga.  618  228 

Habersham  v.  Lehman,  63  Ga.  380 355 

Hall  v.  Greene  County,  119  Ga.  253 312 

Hall  v.  State,  2  Ga.  App.  739 320 

Hamer  v.  Sears,  81  Ga.  288  345 

Harden  v.  Birmingham  Tr.  &  Sav.  Bank,  55  Sou.  943 418 

Harrell  v.  National  Bank  of  Commerce,  128  Ga.  504 399 

Hastey  v.  Roberts,  149  Ga.  479,  100  S.  E.  569 233 

Heard  v.  DeLoach,  105  Ga.  500 355 

Henderson  v.  Hughes,  4  Ga.  App.  52  364 


494  TABLE  OF  CASES  CITED. 

Page 

Henry  v.  McAllister,  99  Ga.  557 359 

High  v.  Cox,  55  Ga.  662  415 

Hixon  v.  Callaway,  2  Ga.  App.  678 318 

Holmes  v.  Pye,  107  Ga.  784 483 

Home  Savings  Bank  v.  City  of  Des  Moines,  205  U.  S.  503,  51  L. 

Ed.  901  460 

Hull  v.  Myers,  90  Ga.  674 432 

Humphrey  v.  Copeland,  54  Ga.  543 296 

Johnson  v.  Leffler  Co.,  112  Ga.  670,  50  S.  E.  488  378,  379 

Johnston  v.  Mayor  and  Council  of  Macon,  62  Ga.  645 463 

Johnston  v.  Schnabaum,  109  S.  W.  1163 354 

Jones  v.  Harrold,  110  Ga.  373 380 

Jones  v.  Weichselbaum,  115  Ga.  369,  41  S.  E.  615 378 

Kennedy  v.  McCardle,  88  Ga.  454 349 

Kight  v.  Robinson,  10  Ga.  App.  548 384 

Kinard  v.  First  National  Bank  of  Sylvester,  125  Ga.  228 402 

Knoxville  National  Bank  v.  Clark,  51  la.  264,  33  Am.  Rep.  129 293 

Lamar  v.  Taylor,  141  Ga.  228 248,  444 

Langdale  v.  Citizens  Bank  of  Savannah,  121  Ga.  105  305,  410 

Leather  Manufacturers  National  Bank  v.  Merchants  National  Bank, 

128  U.  S.  26,  32  L.  Ed.  342 289 

Lewis  v.  Lofley,  92  Ga.  804  312 

Linton  v.  Childs,  105  Ga.  567 463 

Lippincott  v.  Behre,  122  Ga.  546  395 

Livingston  v.  Anderson,  2  Ga.  App.  274  485 

Lockwood  v.  Muhlberg,  124  Ga.  660 473 

Logan  County  Nat.  Bank  v.  Townsend,  139  U.  S.  67 392 

Loganville  Banking  Co.  v.  Forrester,  143  Ga.  302  394,  478 

Longley  v.  Bank,  19  Ga.  App.  701 378 

Love  v.  Lamar,  78  Ga.  323,  3  S.  E.  90 378 

Loyless  v.  Hodges,  44  Ga.  647  343 

McCall  v.  Herring,  116  Ga.  242 478 

McCary  v.  Grandy,  92  Ga.  327  379 

McCulloch  v.  Maryland,  4  Wheaton  316,  4  L.  Ed.  579 463 

McDaniel  v.  Gray,  69  Ga.  434 238 

Maclntyre  v.  Ferst's  Sons  &  Company,  101  Ga.  682 317 

McLaren  v.  Marine  Bank,  52  Ga.  131  415 

Martin  v.  White,  115  Ga.  867  480,  481 

Maynard  &  Co.  v.  Maynard,  12  Ga.  App.  279 378 

Merchants  National  Bank  v.  Parker,  142  Ga.  265  231 

Merchants  Nat.  Bank  of  Savannah  v.  Demere,  92  Ga.  735 299,  456 

Miller  v.  Southwestern  R.  R.  Co.,  55  Ga.  143 349 

Minor  v.  Bank,  1  Peters  (U.  S.)  46 406 

Morris  v.  Banking  Co.,  109  Ga.  12 4  "»(i 

National  Bank  v.  American  Exchange  Bank  (Mo.),  52  S.  W.  265  ..  303 

National  Bank  v.  Everett,  136  Ga.  372  230,  483 

National  Bank  of  Gloversville  v.  Johnson,  104  U.  S.  271,  26  L.  Ed. 

743    .  479 


TABM;  OF  CASES  CITED.  495 

Page 

National  Bank  of  N.  J.  v.  Berrall,  66  L.  R.  A.  599 284 

National  Exchange  Bank  v.  Kimball,  66  Ga.  753 432 

National  Safe  Deposit  Co.  v.  Stead,  250  111.  584,  95  N.  E.  973 344 

Nelms  v.  Keller,  103  Ga.  745,  30  S.  E.  572 378,  379 

Newton  County  v.  Boyd,  148  Ga.  761,  98  S.  E.  347 318 

North  Georgia  Co.  v.  Bebee,  128  Ga/563 469 

Owens  v.  Atlanta  Trust  &  Bkg.  Co.,  122  Ga.  523 310,  452 

Owensboro  National  Bank  v.  City  of  Owensboro,  173  U.  S.  664,  43 

L.  Ed.  850   464 

Pannell  v.  Phillips,  55  Ga.  618 414 

Parker-Fain  Gro.  Co.  v.  Orr,  1  Ga.  App.  628  283 

Parmelee  v.  Williams,  72  Ga.  42 332 

Patton  v.  Bank  of  Lafayette,  124  Ga.  965 360,  429 

Peagler  v.  Davis,  143  Ga.  11,  84  S.  E.  59,  Ann.  Cas.  1917A,  232 233 

Penick,  Tax  Collector,  v.  Foster,  129  Ga.  217 465 

People  v.  Fonda,  62  Mich.  401 391 

People  v.  N.  Y.  Tax  Commissioners,  104  U.  S.  466,  26  L.  Ed.  632  . .  466 

Peoples  Bank  v.  Exchange  Bank,  116  Ga.  820 456 

Perkins  v.  Rowland,  69  Ga.  661  378 

Pettey  v.  Dunlap  Hardware  Co.,  99  Ga.  300 341 

Pollack  v.  National  Bank  of  Commerce,  151  S.  W.  774 273 

Pollak  Bros.  v.  Niall-Herin  Co.,  137  Ga.  23 303 

Quin  v.  Sterne,  26  Ga.  223  405 

Redd  v.  Burrus,  58  Ga.  574  319,  320 

Reese  v.  Fidelity  Assurance  Society,  111  Ga.  482  291 

Reinisch  v.  Consolidated  National  Bank,  45  Pa.  Supr.  Ct.  236 268 

Reviere  v.  Chambliss,  120  Ga.  714  342 

Rodgers  v.  Black,  99  Ga.  139  364 

Roland  v.  Coleman,  76  Ga.  652  412 

Rountree  v.  Finch,  120  Ga.  743 241 

Ruffin  v.  Paris,  75  Ga.  654  359 

Russell  v.  Turner,  14  Ga.  App.  344 477 

Salley  v.  Terrill,  95  Me.  553,  55  L.  R.  A.  730 294 

Sawyer  v.  Cargile,  72  Ga.  290  301 

Schofield  v.  Jones,  85  Ga.  816,  11  S.  E.  1032 379 

Scott  v.  Armstrong,  146  U.  S.  499,  36  L.  Ed.  1059 444 

Scott  v.  Pound,  61  Ga.  579   363 

Second  National  Bank  v.  Wrighston,  63  Md.  81  249 

Sewell  v.  Norris,  128  Ga.  824 358 

Sexton  v.  Dreyfus,  219  U.  S.  339,  55  L.  Ed.  244 298 

Shackelford  v.  Orris,  135  Ga.  29 .359,  480 

Sherburne  v.  Rickards,  15  Banking  Law  Journal  536  268 

Shipsey  v.  Bowery  National  Bank,  59  N,  Y.  485 307 

Sigman  v.  Austin,  112  Ga.  570  350 

Simmons  v.  Council,  5  Ga.  App.  386 397 

Smith  v.  Maddox-Rucker  Banking  Co.,  8  Ga.  App.  289 279 

Smith  Roofing  &  Contracting  Co.  v.  Mitchell,  117  Ga.  772 301 

Sou.  Iron  &  Equip.  Co.  v.  Voyles,  138  Ga.  258  232 

Spalding  v.  Paine,  81  Ky.  416 389 


496  TABLE  OF  CASES  CITED. 

Page 

State  v.  Clement  Nat.  Bank,  84  Vt.  167,  78  Atl.  944  465 

Stephens  v.  Tucker,  55  Ga.  543 '. 320,  484 

Stimpson  Computing  Scale  Co.  v.  Holmes-Hartsfield  Co.,  6  Ga,  App. 

569 232 

Stout  v.  Benoist,  39  Mo.  277,  90  Am.  Dec.  468  250 

Sullivan  v,  Sullivan,  56  N.  E.  116 249 

Swann  v.  Morris,  83  Ga.  143  363 

Swan  Edwards  Co.  v.  Union  Savings  Bank,  17  Ga.  App.  572  257 

Sylvania  &  Girard  R.  R.  Co.  v.  Hoge,  129  Ga.  734  451 

Tate  v.  City  of  Elberton,  136  Ga.  301  312,  374 

Temples  v.  Equitable  Mortgage  Co.,  100  Ga.  503,  28  S.  E.  232,  62  Am. 

St.  R.  326   378 

Third  National  Bank  of  Columbus  v.  Poe,  5  Ga.  App.  113,  62  S.  E. 

826    295,  379 

Thompson  v.  First  State  Bank  of  Dawson,  99  Ga.  651 474 

Thornton  v.  Carver,  80  Ga.  397 483 

Thornton  v.  Martin,  116  Ga.  115  300 

Thornton  v.  The  State,  5  Ga.  App.  397  347 

Tillinghast  v.  Johnson,  82  Atl.  788,  41  L.  R.  A.  (N.  S.)  764  343 

Town  of  Wadley  v.  Lancaster,  124  Ga.  354 373 

Tribble  v.  Anderson,  63  Ga.  56   329 

Trowbridge  v.  Spinning,  23  Wash.  48,  62  Pac.  125,  54  L.  R.  A.  204  . .  344 

Ullman  v.  Brunswick  Title  Guarantee  &  Loan  Co.,  96  Ga.  625 489 

Union  Savings  Bank  &  Tr.  Co.  v.  Dottenheim,  107  Ga.  606  356 

United  States  v.  Barrett,  111  Fed.  369  309 

United  States  v.  Kuhl,  85  Fed.  624  (D.  C.  Iowa)    309 ' 

Van  Allen  case,  3  Wall.  573,  18  L.  Ed.  229 460 

Van  Dyke  v.  Van  Dyke,  123  Ga.  686 229 

Verdery  v.  Dotterer,  69  Ga.  194   349 

Wade  v.  Powell,  31  Ga.  3  360 

Walker  v.  Maddox,  105  Ga.  254  241 

Wall  v.  County  of  Monroe,  103  U.  S.  77,  26  L.  Ed.  430 413 

Walton  Guano  Co.  v.  McCall,  111  Ga.  114  228 

Washington,  Etc.,  Co.  v.  Susquehanna  Coal  Co.,  26  App.  D.  C.  149. .  344 

Watson  v.  Mayor  and  Council  of  Thomson,  116  Ga.  546 345 

Watt-Harley-Holmes  Hdw.  Co.  v.  Day,  1  App.  646  343 

Weisberger  Co.  v.  Barberton  Sav.  Bank  (Ohio),  34  L.  R.  A.  (N.  S.) 

1100 289 

Weld  v.  Eliot  Five  Cent  Savings  Bank,  158  Mass.  339,  33  N.  E.  519  283 

Western  &  Atlantic  R.  R.  v.  Atlanta,  113  Ga.  536 347 

Weston  v.  City  Council  of  Charleston,  2  Peters  449,  7  L.  Ed.  481  . .  466 

Wheatley  v.  Glover,  125  Ga.  710 455 

Whirtington  v.  Wright,  9  Ga.  23  359 

Wilkinson  v.  Bertock,  111  Ga.  187 446 

Williams  v.  Lewis,  69  Ga.  825  415,  432 

Williamson  v.  Orient  Insurance  Co.,  100  Ga.  791  489 

Wilson  v.  The  Citizens  &  Southern  Bank,  23  Ga.  App.  654,  99  S. 

E.   239    .  411 


TABLE  OF  CASES  CITED.  497 

Page 

Whitney  v.  Butler,  118  U.  S.  655,  30  L.  Ed.  266  456 

Wolff  v.  Hawes,  105  Ga.  153  359,  377 

Wood  v.  The  State,  12  Ga.  App.  651 345 

Woodbury  v.  Roberts,  59  Iowa  348,  13  N.  W.  312 398 

Woods  v.  Colony  Bank,  114  Ga.  683  257 

Wynn  &  Robinson  v.  Tyner,  139  Ga.  765 309 

Youmans  Jewelry  Co.  v.  Blackshear  Bank,  141  Ga.  357 305 


INDEX  TO  OPINIONS  OF  GENERAL 
COUNSEL. 

[For  References  to  Statutes,  See  Separate  Index.] 

A. 

Page 
ACCOMMODATION  INDORSERS. 

Extension,  without  consent  of,  discharge  223 

ADMINISTRATOR. 

Certificate  of  deposit,  must  produce  before  payment 250 

Interest,  estate  of  decedent  not  exempt  from  361 

Note  signed  by,  bound  personally,  but  estate  not  bound 229 

Stock,  may  vote  449 

ADVANCE. 

Deducting  interest  in,  usurious  478 

ADVANCES. 

Securities  for,  made  in  good   faith,  not  preferences,  although 

given  within  four  months  of  bankruptcy 234 

Warehouseman,   made  by,   "customary  charges   and   advances," 

not  included    487 

ADVERTISEMENT. 

Currency,  stamping  on,  criminal,  321 

AGENCY. 

Administrator,  note  signed  by,  binds  personally,  but  estate  not 

bound 229 

Bank  paying  to  supposed  agent  of  payee  does  so  at  its  peril  . . .       226 

Check  indorsed  by  agent,  bank  must  look  to  authority  of 223 

Deposit  in  name  of  agent;    liability  of 

Bank  to  principal  224 

Principal   for  overdraft    225 

Garnishment,  deposit  in  name  of  agent,  subject  to 341 

Messenger  of  bank,  payment  of  drafts  to,  without  production 

of  draft,  at  payer's  risk 227 

Note  signed  by  named  party  as  agent  is  the  individual  undertak- 
ing of  the  maker  228 

"ALL  OTHER  INDEBTEDNESS." 

Collateral,  pledged  to  secure,  valid  299 

ANSWER. 

Garnishment : 

Covers  what  debts    340 

Filed   when    338 

ATTACHMENT. 

Draft,  amount  paid  on,  with  order  notify  bill  of  lading,  not  sub- 
ject to,  when  discounted  by  drawer 230 

499 


500  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
ATTACHMENT— continued. 

Foreign  creditors  of  Georgia  bank  can  subject  its  account  in  an- 
other   State   by    230 

ATTESTATION  OF  INSTRUMENTS. 

Crop  mortgages,  same  as  mortgages  on  real  estate  318 

Employees  of  bank,  unless  pecuniarily  interested,  not  disquali- 
fied to  attest  papers  in  bank's  favor  232 

Notary  public,  by,  not  necessary  to  state  when  commission  ex- 
pires          233 

B. 
BANK. 

Stock,  holding,  liable  as  a  stockholder 454 

BANK  BOOKS. 

Taxation,  production  of,  to  tax  officers  461 

BANKING  ACT  OF  1919. 
See   Separate  Index. 

BANKRUPTCY. 

Collateral,  interest  does  not  stop,  where  proceeds  of  cover  prin- 
cipal and  interest  of  original  note  298 

Depositor : 

Indebtedness  of,  bank  can  set  off 236 

Note  of,  bank  may  set-off  against  deposit  of  438 

Joint  note,  proof  of,  not  necessary  to  hold  co-debtor 233 

Mortgaged  property,  trustee  can  sell  free  of  lien 236 

Note  waiving  homestead  is  a  debt  dischargeable  in 235 

Pledger  of  -collateral,  rights  of  holder  of 298 

Securities  for  advances  made  in  good  faith  not  preferences  . . .       234 

Stockholder's  liability  debt  dischargeable  in   453 

Waiver  of  right  to  go  into,  in  face  of  note,  is  not  valid 234 

BILL  OF  EXCHANGE. 

"With  exchange,"  payable,  negotiable 399 

BILL  OF  LADING. 
Railroad  delivering  goods  shipped  order  notify  without  surrender 

of  bill  of  lading  liable  to  transferee 237 

BILLS  RECEIVABLE. 

Taxation,  subject  to  467 

BLANK. 

Indorsement  in,  payable  to  bearer : 

Holder  may  sue  in  own  name  355 

Notwithstanding  subsequent  limited  indorsement 355 

BOOKS  OF  THE  BANK. 

Stockholder,  whose  name  appears  on,  liability  of 455 

BONA  FIDE  HOLDER. 

Usury,  can  be  pleaded  against  477 

BOND  FOR  TITLE. 

Lien  of,  transferred,  inferior  to  lien  of  prior  mortgage 241 


INDEX  TO  OPINIONS.  501 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
BOND  FOR  TITLE— continued. 

Mortgage,  his  interest,  holder  of,  may 385 

Vendor : 

Land,  possession  of,  how  recovered  when  vendee  defaults  in 

payment  240 

Rights  of,  upon  default 238 

BONDS. 

Trust  company,  negotiable,  ordinary,  cannot  issue 470 

BORROWING  POWER. 

National  banks,  of 392 

BRANCH  BANK. 

Protest  of  check,  drawn  on,  presentment  of 428 

BUSINESS. 

Holidays,  banks  may  carry  on  345 

BY-LAWS. 

Directors,  election  of,  governed  by  242 

Lien  created  by : 

Cannot  be  asserted  against  holder  of  stock  without  notice  . .  243 
Not  affect  purchaser  of  stock  without  notice  at  judicial  sale  244 
Transferrer  of  stock  not  liable  to  criminal  prosecution 244 

C. 
CASHIER. 

Certificate  of  deposit,  payable  to  himself,  cannot  issue  246 

Checks  in  his  own  favor,  cannot  draw  on  bank's  correspondents      246 
Loans  made  by,  relieved  of  responsibility  when  approved  by  di- 
rectors        327 

Power  to  bind  bank  by  contract,  has  none,  except  in  the  dis- 
charge of  ordinary  duties    245 

CASHIER'S  CHECK. 

Garnishment,  subject  to    341-342 

Holder,  bona  fide,  good  in  hands  of 247 

Lost,  duplicate  issued,  protection  against 375 

Payee's  name,  mistake  in,  non-drawee  bank  not  liable 290 

Payment,  stop,  bank  cannot,  against  bona  fide  holder 286 

"CASH  OR  ORDER." 

Check,  payable  to,  is  payable  to  bearer 294 

CERTIFICATION  OF  CHECKS. 
Payment  of : 

Certified  check: 

Cannot  be  stopped  254 

Not  stopped  by  notice  to  payee 254 

Check  certified  after  business  hours  cannot  be  stopped 255 

Telephone  or  telegraph : 

Cannot  be  by 251-253  . 

Payee  notified  by  that  check  good,  drawer  may  stop  payment      255 


502  INDSX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
CERTIFICATE  OF  DEPOSIT. 

Cashier  cannot  issue  to  himself  246 

Deposit,  ranks  as    248 

Garnishment,  subject  to   341 

Holder  of,  bona  fide,  protected 251 

Husband,  issued  to,  payable  to  wife  in  event  of  death,  must  be 

paid  to  administrator 248 

Production  and  surrender  necessary  before  payment 250 

Protestable,  is  not  416 

Signature  of  payee,  bank  must  know  250 

CERTIFIED  CHECK. 

Post-dated,  not  paid  before  date  it  bears 278 

CHECKS. 

Agent,  indorsement  by : 

Bank  must  look  to  authority  of  223 

Unauthorized,  bank  paying  liable 226 

Cashier's : 

In  his  own  favor,  cannot  draw  on  bank's  correspondent  ....       246 

Payee's  name,  mistake  in,  non-drawee  bank  not  liable 290 

Stop  payment  of,  bank  cannot,  against  bona  fide  holder 286 

"Cash  or  order,"  payable  to,  is  payable  to  bearer 294 

Death : 

After  negotiation,  not  revoke  270 

Revokes  269 

Deposited  after  banking  hours,  payment  stopped,  charged  to  de- 
positor, when    286 

Depositor  credited  with,  by  bank  on  which  drawn,  cannot  be 

charged   back    272 

Exchange,  may  be  made  payable  only  in 335 

Forged : 

Bank  cannot  recover  amount  paid  on  from : 

Merchant  who  accepted  without  notice  259 

Payee   of    257 

Illiterate,  bank  may  recover  from  merchant  witnessing  mark 

of  drawer 260 

Funds,  insufficient: 

All  presented  simultaneously,  none  should  be  paid 267 

Bank  may  decline  to  make  any  payment  on 264 

Drawer  liable  to  holder 277 

First   presented,   held   by   bank   for   collection,   subsequent 

check  covered  by  funds  must  be  paid  268 

National  bank,  drawer  criminally  liable 278 

Holder,  bona  fide: 

Drawer  liable  to,  though  check  lost  or  stolen  262 

Protected    261 

Illiterate,  bank  may  require  witness  to  signature  of  263 

Indorsements : 


INDEX  TO  OPINIONS.  503 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
CHECKS— continued. 

Collection,  identification  of  party  making,  for,  bank  may  re- 
quire    307 

Forged,  payment  of,  bank  is  liable  for 288 

Name: 

Payee  of,  same  as  person  paid,  non-drawee  bank  liable 290 

Person  paid  same  as  payee,  bank  liable  289 

Note,  payment  of,  given  in,  not  paid  and  surety  not  released  . . .  402 

Overpaid  through  mistake  of  fact,  money  can  be  recovered  ....  281 
Payment  of : 

Bank  may  refuse  if  not  presented  by  bank  through  which 

payable 273 

Drawee  bank,  by,  final  as  againsf  "insufficient  funds" 270 

Drawer  may  stop 283 

Indorser  for  loan  cannot  stop 287 

Payee  cannot  stop  285 

Stopped : 

Bank  pays  at  its  own  risk 284 

Holder  has  right  of  action  against  drawer  and  indorser  285 
When  raised : 

Drawer  negligent,  must  stand  loss 274 

Money  recoverable  from  person  receiving  274 

Pencil,  written  in,  fraudulently  altered,  drawer  must  stand  loss  275 
Post-dated : 

Certified,  not  paid  before  date  it  bears 278 

Money  paid  on,  right  of  bank  to  recover 279 

Protest : 

Agent,  indorsed  by,  authority  not  shown,  authorized 418 

Fees  on,  may  be  charged  to  drawer's  account 430 

Forged,  of  419 

Payment  not  refused,  bank  protesting  liable  for  fees  and 

damages    431 

Required,  where  payment  stopped  415 

Subject  to,  immediately  upon  legal  presentment  425 

Protestable,  not  indorsed  by  payee,  are  not 417 

Signature  unlike  authorized  signature,  protest  safer 420 

Stolen,  signed,  amounts,  etc.,  fraudulently  filled  in,  drawer  not 

liable  on 291 

Stranger,  identification  by  customer  not  make  liable  for  worth- 
less check 269 

Taxes  due  United  States,  in  payment  of,  must  be  remitted  at  par  335 

Undated,  valid,  and  bank  may  pay 281 

See  Certification  of  Checks. 
CO-DEBTOR. 

Joint  note,  bankruptcy,  not  necessary  to  prove  to  hold  233 

COLLATERAL. 

"All  other  indebtedness,"  pledged  to  secure,  valid  299 

Bankruptcy : 


504  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Inaex.] 

Page 
COLLATERAL — continued. 

Interest,  does  not  stop,  where  proceeds  of  cover  principal 

and  interest  of  original  note  298 

Pledger,  of,  rights  of  holder  of 298 

Indorsements,  all  indebtedness,  pledged  to  secure  would  cover  . .       300 

Insolvency  of  bank  pledging,  holder  of,  may  collect 299 

Lost  negligently,  pledgee  liable  for  value  of 296 

Note: 

Holder,  for  value  of,  is  purchaser  295 

Security,  given  as,  renewal  of  debt  not  relieve  maker  of 

liability    297 

Protestable,  paper  held  as,  is  though  principal  debt  not  due 417 

Sale  of : 

Public  or  private,  without  notice,  under  terms  of  agreement, 

valid   300 

Valid  if  terms  of  power  followed 300 

Sunday  newspapers,  sale  of,  advertised  in,  invalid  301 

Wife's  property  pledged  by  husband,  pledgee  without  notice  pro- 
tected          295 

Year's  support,  superior  to  claim  of  creditor  on 489 

COLLECTIONS. 

Diligence  of  correspondent  bank  required  306 

Indorser,  identification  of,  on  check,  bank  may  require 307 

Liability  for,  general  rules  governing 301 

COMMISSIONS. 

Usury,  paid  for  loans,  when  constituting 476 

COMMITTEE. 

Loans,  authority  to  make,  directors  may  delegate  to 328 

COMMON  STOCK. 

Definition  of  447 

CONDITIONAL  BILL  OF  SALE. 

Mortgages,  cannot  be  foreclosed  as,  title  to  the  personalty  being 

retained   308 

CONFEDERATE  MONEY. 

Passing  not  a  violation  of  United  States  statutes 309 

CONTRACT. 

Cashier  cannot  bind  bank  by,  except  in  the  discharge  of  ordinary 

duties  245 

CORPORATE  STOCK. 

Judgments  against  vendor,  transferee  of  not  affected  by 310 

Power  of  attorney,  transfer  of,  should  be  accompanied  by 311 

CORPORATION  TAX. 

State  banks,  liable  for 462 

COTTON. 

"Customary  charges   and   advances,"   warehouseman,   advances 

made  by,  does  not  cover  487 

Tenant,  judgment  against  levied  on,  warehouse  receipts  trans- 
ferred, rights  of  parties  486 


INDEX  TO  OPINIONS.  505 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 

COTTON— continued. 
Warehouse  receipts : 

Pledgee  of,  right  to  sell  property 488 

Stored,  transferree  or  pledgee  of,  how  far  protected  against 

liens    481 

COUNTY  BOARDS  OF  EDUCATION. 

Loans  to  371 

COUNTY  LOANS. 

Money  for  current  expenses,  county  authorities  cannot  make  . . .       311 
COUNTY  WARRANTS. 

Interest,  do  not  bear  313 

Payment  of,  order  of  312 

Protestable,  are  not  412 

School  teacher's  salary,  valid  ; 313 

Taxes,  whether  can  be  used  to  pay 314 

CREDITORS. 

Depositors  of  insolvent  bank,  share  equally  with  other 323 

Foreign,  of  Georgia  bank,  can  subject  its  account  in  another 

State  by  attachment   230 

CREDIT  STATEMENTS. 

Advantages  of   315 

CROP. 

Growing,  must  be,  before  it  can  be  mortgaged 319 

Peaches,  mortgage  on,  valid   319 

CROP  MORTGAGES. 

Attestation,  same  as  mortgages  on  real  estate  318 

Crop,  growing,  must  be  to  be  mortgaged  319 

Judgment,  older: 

Crop  subject  to,  handled  how  317 

Superior  to   317 

Peaches,  mortgage  on,  valid  319 

Purpose  for  which  given,  advantages  of  reciting 321 

CROPPER. 

Judgment  against,  levied  on  cotton,  warehouse  receipt  trans- 
ferred, rights  of  parties   486 

CURRENCY. 

Advertisement,  stamping  on,  criminal 321 

"CUSTOMARY  CHARGES  AND  ADVANCES." 

Warehouse  receipt,  phrase  in,  covers  what 487 

CUSTOMER. 

Credit  statement  of,  advantages  of 315 

D. 
DATE. 

Check  without,  valid,  and  bank  may  pay 281 

DAYS. 

Interest,  number  allowable  in  calculating 360 


506  IND^X  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
DEATH. 

Check: 

After  negotiation,  does  not  revoke  270 

Revokes    269 

Power  of  sale  in  collateral  note,  not  revoked  by 411 

DEBT. 

Mortgage,  may  cover  additional,  when 384 

Subsequently  created,  mortgage  not  cover  383 

DEBTOR. 

Usury  paid,  may  recover,  when  477 

DEED. 

Consideration   nominal   and   love   and   affection,   whether   vol- 
untary depends  on  intention  of  parties  480 

DEED  TO  SECURE  DEBT. 

Year's  support  inferior  to  : 489 

DEMAND. 

Protest,  waiver  of,  is  equivalent  to  waiver  of  432 

DEMAND  NOTE. 

Bona  fide  holder  of,  there  can  be  no  400 

Check  payable  to  maker  of,  bank  may  set-off  against 437 

DEPOSITS. 

Agent,  in  name  of,  liability  of : 

Bank   to    principal    224 

Principal   for  overdraft    225 

Certificate  of  deposit  ranks  as  248 

Check  deposited  after  banking  hours,  payment  stopped,  charged 

to  depositor  when  286 

Creditors  of  insolvent  bank,  depositors  share  equally  with  other      323 
Demand  and  time  notes,  set-off  against,  when  bank  insolvent  . .      444 

Garnishment,  check  not  charged  against,  subject  to 342 

Gift  of,  to  take  effect  at  death  of  donor,  invalid  except  by  will  .       323 

Heirs  of  deceased  depositor,  payment  of  balance  to 322 

Insolvent  bank,  note  in,  depositor  may  set-off  against 444 

Interest  on,  depositor's  status  not  changed  by  payment  of 323 

Minor  son,  father  cannot  check  out  when  made  by  324 

Notes : 

Bank's  right  to  set-off,  when  payable  at 441 

Matured,  of  customer,  bank  may  set-off  against 436 

Series  of,  purchased  by  bank  may  set-off  against  437 

Special,  may  be  checked  out  for  other  purposes 324 

Two  names,  payable  how  325 

Usury,  portion  of  8  per  cent,  loan  required  to  be  kept  on  deposit 

with  lender,  constitutes    475 

DEPOSITOR. 

Bankruptcy  of,  bank  can  set-off  indebtedness  of 236 

Check  credited  to,  by  bank  on  which  drawn,  cannot  be  charged 
back   .  272 


INDEX  TO  OPINIONS.  507 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 

DEPOSITOR— continued. 
Deceased,  note  of : 

Matured,  deposit  may  set-off  against 438 

Unmatured,  deposit  of,  cannot  be  set-off  against 439 

Funds  of,  insufficient  to  pay  check: 

Bank  may  decline  to  make  any  payment 264 

Collection,  held  for,  bank  must  pay  subsequent  check  cov- 
ered by  funds  .*. .       268 

Presented  simultaneously,  none  should  be  paid 267 

DIGEST  OF  DECISIONS. 

See  Part  II. 
DILIGENCE. 

Collections,  required  of  correspondent  bank  making 306 

DIRECTORS. 

By-laws  govern  election  of 242 

Committee,  authority  to  make  loans,  may  delegate  to 328 

Discount  paper  payable  to  themselves,  cannot 330 

Dividends,  declare 330 

Indorser  on  note  held  by  bank,  sale  of  stock,  not  relieve  of  lia- 
bility        328 

Loans  made  by  cashier,  approval  of  by,  relieves  him 327 

National  bank,  stock  ownership  necessary  to  qualify 326 

Proxy,  vote  by,  cannot 481 

Stock,  must  hold  in  own  right 326 

DISCOUNT. 

National  banks  may,  at  highest  legal  rate  393 

Officer  or  director  cannot,  paper  payable  to  himself 330 

Seven  per  cent,  or  more,  amount  reserved  not  exceeding  8  per 

cent.,  not  usurious  though  not  in  writing 329 

Usury,  note  of  third  party,  at  more  than  lawful  rate,  is  not  ....       478 
DISHONOR. 

Notice  of,  mailed  when 429 

DIVIDENDS. 

Collateral,  stock  held  as,  payable  to  pledgee 331 

Directors  declare  330 

Stock  transferred  between  date  of  declaration  and  date  of  pay- 
ment, payable  to  whom  331 

Stockholder,  payable  to  only,  or  his  legal  representative  ... 332 

DRAFTS. 

Attachment,  amount  paid  on,  with  order  notify  bill  of  lading 

attached,  not  subject  to  when  discounted  by  drawer 230 

Bill  of  lading  delivered,  order  notify  shipment,  bank  must  for- 
ward  money  received    333 

Collection  of,  general  rules  governing  liability 301 

Liability  of  drawer  and  acceptor  of 332 

Messenger  of  bank,  payment  to  without  production  of  draft,  at 
payer's  risk  227 


508  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
DRAFTS — continued. 

Telegram,  forged,  bank  wiring  instruction  to  pay  on  authority 

of,  must  protect  bank  paying 334 

"With  exchange,"  payable,  negotiable 399 

DRAWER. 

Check  raised,  negligent  drawer  must  stand  loss 274 

E. 
EMPLOYEE. 

Attest  paper  in  bank's  favor,  may  unless  pecuniarily  interested  .      232 
ERROR. 

Pass  book  credited  through,  money  may  be  recovered  409 

ESTOPPEL. 

Wife  witnessing  transfer  of  insurance  policy  is  estopped  from 

claiming  proceeds  under  357 

EXCHANGE. 

Checks  may  be  made  payable  only  in 335 

Rate  of  not  fixed  334 

Taxes  due  the  United  States,  checks  for,  must  be  remitted  at  par      335 
EXECUTOR  OR  ADMINISTRATOR. 

Deposits  of,  personal  debts,  cannot  be  set-off  against 445 

EXPENSES. 

Current,  county  authorities  cannot  borrow  for  311 

EXTENSION. 

Accommodation  indorsers,  not  consenting,  discharged  by 223 

Surety,  consent  of,  necessary  to  457 

F. 
FEE. 

Protest,  paper  presented  before  due,  notary  public  not  entitled  to      430 
FIXTURES. 

Title  retained  to,  vendor's  rights  protected  how :      337 

FORGERY. 
Check: 

Bank  cannot  recover  money  paid  on  from : 

Merchant  who  accepted  without  notice  259 

Payee  of  257 

Illiterate   drawer  of,   bank  can   recover   from   merchant 

witnessing  mark  of  260 

Holder  of,  acquires  no  rights  under  449 

FRACTIONAL  CURRENCY. 

Legal  tender,  as  364 

FUNDS. 

Checks,  insufficient  to  pay: 

Bank  may  decline  to  make  any  payment 264 

Collection  held  for,  bank  must  pay  subsequent  check  cov- 
ered by  funds    268 

Drawer  liable  to  holder  . . .  277 


INDEX  TO  OPINIONS.  509 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
FUNDS— continued. 

National  bank,  drawer  criminally  liable 278 

Several,  all  presented  simultaneously,  none  should  be  paid  .      267 

G. 
GARNISHMENT. 

Agent,  deposit  in  name  of,  subject  to 341 

Answer : 

Covers  what  debts    340 

When  filed  338 

Cashier's  check  subject  to 341,  342 

Check,  bona  fide  holder  of,  protected  against 261 

Deposit,  subject  to,  against  check  not  charged  to  account *  342 

Names,  several  deposits  in  same  or  similar,  answered  how 344 

National  banks  are  subject  to  340 

Negotiable  instruments  are  subject  to  341 

Safety  deposit  boxes,  contents  of,  subject  to 343 

GIFT. 

Deposit,  gift  of,  to  take  effect  at  death  of  donor,  invalid  except 

by  will  323 

GUARDIAN. 

Stock  may  vote  ward's 449 

H. 

HEIRS. 

Deceased  depositor,  payment  of  balance  to  322 

HOLDER. 

Cashier's  check,  good  in  hands  of  bona  fide 247 

Certificate  of  deposit,  bona  fide,  protected   251 

Check,  bona  fide: 

Drawer  liable  to  though  lost  or  stolen 262 

Protected    261 

HOLIDAY. 

Business  on,  banks  may  carry  on 345 

Note  due  on,  payable  when 346 

Stockholders  meeting  may  be  held  on  346 

Sunday,  falling  on  346 

HOMESTEAD. 

Continues  until  death  of  wife  and  majority  or  marriage  of  chil- 
dren        350 

Proceeds  of  property  of  also  exempt 350 

Waiver  of  existing,  invalid  350 

HUSBAND  AND  WIFE. 

Certificate  of  deposit  issued  to  husband,  payable  to  wife  in  event 

of  death,  must  be  paid  to  administrator 248 

Joint  mortgage  by,  valid 379 

Partners  in  business,  may  be 351 

Wife's  property,  pledged  by  husband  as  collateral,  pledgee  with- 
out notice  protected  295 


510  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
I. 
IDENTIFICATION. 

Stranger,  customer  not  liable  though  check  worthless  269 

ILLITERATE. 
Check  of: 

Bank  may  require  witness  to  signature 263 

Forged,  bank  may  recover  of  merchant  witnessing  mark  of 

drawer   260 

INDORSEMENT. 

Accommodation,  bank  has  no  power  to  make  353 

Check : 

.   Agent,  by,  bank  must  look  to  authority  of 223 

Forged,  bank  is  liable  for  payment  of  288 

Collateral,  pledged  to  secure  all  indebtedness,  would  cover 300 

Collection,  identification  of  party  making,  bank  may  require  ....       307 
In  blank : 

Bearer,  payable  to,  and  holder  may  sue  in  own  name 355 

Check,  payable  to  bearer  notwithstanding  subsequent  limited 

indorsement    355 

Indorser,  suit  against,  without  joining  maker  352 

Liability  of  indorser  351 

"Pay  to  any  bank  or  banker"  for  collection  only  353 

Prior  indorsements,  warrants   353 

INDORSER. 
Deposit  of : 

Bank  cannot  set-off  against  440 

Maker  of  note,  failure  of  bank  to  set-off  against,  not  dis- 
charge           440 

Liability  of    351 

Mortgage  given  to  secure,  principal  debtor  cannot  enforce 390 

Suit  cannot  be  brought  against  maker  and  indorser  in  county  of 

residence  of  later 396 

Usury  in  homestead  waiver  note,  will  not  relieve  472 

INFORMATION. 

Depositor's  account,  bank  should  not  give  as  to  264 

INSOLVENCY. 

Collateral,  holder  of,  may  collect  when  bank  pledging  becomes 

insolvent    299 

Deposit,  bank  may  set-off  against  unmatured  note  in  event  of  . .       436 
INSTALLMENT  LOANS. 

Saving  banks  paying  interest  on  deposits  not  subject  to  check, 

may  make    356 

INSURANCE. 

Title  to  property,  change  in  without  notice  to  company  void,s 

policy   357 

Wife  witnessing  transfer  of  policy  estopped  from  claiming  pro- 
ceeds under   357 


INDEX  TO  OPINIONS.  511 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
INTEREST. 

County  warrants  do  not  bear  313 

Days,  number  allowable  in  calculating 360 

Decedent,  estate  of,  not  exempt  from 361 

Deposit,  payment  of  not  change  status  of  depositor 323 

Partial  payments,  method  of  calculating 360 

Usury,  penalty  for 471 

J. 
JOINT  NOTE. 

Bankruptcy,  proof  of  not  necessary  to  hold  co-debtor  233 

Makers  of,  must  be  sued  together 395 

JUDGMENT. 

Crop  mortgage  superior  to  older  317 

Judgment  notes  unknown  in  Georgia  403 

Stock,  transfer  before,  valid  451 

K. 
KITING. 

Definition   of    361 

L. 
LAND. 

Bond  for  title,  rights  of  vendor  upon  default  of  vendee 238 

Vendor,  bond  for  title  given,  possession  recovered  how  when 

vendee  defaults  in  payment  240 

LANDLORD. 

Warehouse  receipts  transferred,  judgment  against  tenant  levied, 

— rights  of  parties    486 

LANDLORD'S  LIEN  FOR  RENT. 

Indorsement  of  rent  note,  transfers   362 

Rank  of   434 

Record  of    435 

LANDLORD'S   LIEN   FOR   SUPPLIES    FURNISHED. 

Existence  of,  when  furnished  by  another 362 

LEGAL  TENDER. 

Fractional  currency  as   364 

LIABILITY. 

Collections  by  banks,  general  rules  governing  301 

LIBERTY  BONDS. 

Taxation,  cannot  be  deducted  in  making  returns  for  460 

LICENSE  TAX. 

State  bank,  subject  to  and  must  register  with  ordinary 365 

LIENS. 

By-laws,  created  by: 

Holder  of  stock  without  notice  cannot  be  asserted  against  .      243 
Purchaser  of  stock  without  notice  at  judicial  sale,  not  af- 
fected by    244 

Transferrer  of  stock  not  criminally  liable  244 


512  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 

LIENS — continued. 

Cotton,   stored,  transferree  or  pledgee  of  warehouse   receipts, 

how  far  protected  against 481 

Junior,  holder  of,  may  take  up  prior  debt  and  sell  property 367 

Mortgages,  rank  of   387 

Sale  of  personal  property  not  divest  senior 366 

Tax,  fi.  fas.,  limitation  of 467 

LIVE  STOCK. 

Loans  to  dealers  in,  to  buy  stock 369 

LOANS. 

Boards  of  education  may  make   371 

Cashier,  made  by,  relieved  of  responsibility  when  approved  by 

directors    327 

Committee,  authority  to  make,  directors  may  delegate  to  328 

Live  stock  dealers,  to  buy  stock 369 

Local  school  districts,  trustees  of,  cannot  borrow  money 373 

Married  woman,  loans  to,  when  valid   378 

Officers,  authority  to  borrow,  shown  how  368 

Public  service  corporations,  for  more  than  twelve  months,  rail- 
road commission  must  approve 374 

Year,  officers  power  to  make  conferred  for  one 367 

LOANS  TO  PUBLIC  CORPORATIONS. 

Education,  county  boards  of  371 

Local  school  districts,  trustees  of,  without  authority  to  borrow 

money    373 

Municipality,  no  right  to  borrow  money  except  to  supply  casual 
deficiencies   373 

LOCAL  SCHOOL  DISTRICTS. 

Borrow  money,  trustees,  cannot 373 

LOSS  IN  MAILS. 

Addressee,  falls  on  375 

Check,  drawer  liable  to  bona  fide  holder  of 262 

Collateral  negligently  lost,  pledgee  liable  for  value  of  296 

LOST  INSTRUMENTS. 

Duplicates,  protection  against  375 

Stock  certificates,  established  how   376 

M. 

MAILS. 

Loss  in,  falls  on  addressee  375 

MARRIED  WOMAN. 

Debt  of  another,  cannot  be  surety  for  377 

Husband  and  wife,  joint  mortgage  of,  valid  379 

Loans  to,  valid,  when 378 

Note  of,  used  as  collateral,  valid  in  hands  of  bona  fide  holder      380 


INDEX  TO  OPINIONS.  513 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
MATURITY. 

Paper,  postcard  notice  of,  mailable  411 

Protest : 

After  maturity,  paper  not  subject  to 424 

Date  due  not  date  to  which  extended,  proper  time  for 426 

MESSENGER. 

Payment  of  draft  to,  without  production  of  draft,  at  payor's  risk  227 

MINORS. 

Deposit  of,  parent  cannot  check  out  though  made  by 324 

Stock,  father  liable  for  assessment  on,  bought  in  name  of 381 

MONEY. 

Taxation,  subject  to  466 

MORTGAGES. 

Additional  indebtedness,  may  cover,  when   384 

Bankruptcy,  trustee  can  sell  property  free  of  lien  of 236 

Bond  for  title,  holder  of,  may  mortgage  his  interest  385 

Conditional  bill  of  sale  to  personalty  retaining  title  cannot  be 

foreclosed   as    308 

Corporation  property,  superior  to  pledges  of  its  stock 389 

Debt  subsequently  created,  not  covered  by 383 

Husband  and  wife,  joint,  valid  379 

Indorsement,  given  to  secure,  principal  debtor  cannot  enforce  . .  390 
Liens : 

Bond  for  title  subsequently  transferred,  superior  to  lien  of  .  241 

Rank  of 387 

Peaches,  on  crop  of  , %. 319 

Personalty,  residence  of  mortgagor  changed,  does  not  have  to  be 

re-recorded    386 

Purchase  money,  holder  of,  recorded,  can  subject  property  in 

hands  of  second  purchaser  385 

Renewals  of  original  note  will  not  affect  . . .- 382 

Stock,  corporate,  not  subject  to   387 

Year's  support  superior  to  489 

MUNICIPALITIES. 

Bonds,  cannot  tax  their  own   465 

Business  tax,  may  levy  on  state  banks  462 

Loans  to,  valid  only  when  to  supply  casual  deficiencies  373 

N. 
NAMED  BANK. 

Note,  providing  for  payment  at,  liability  of  maker  and  indorsers      401 

NAMES. 

Check,  paid  to  person  of  the  same  name  as  the  payee : 

Bank   liable    289 

Non-drawee  bank  liable   290 

Garnishment  on  bank  having  several  accounts  in  same  or  similar 

names,  answered  how  344 

33 


514  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
NATIONAL  BANKS. 

Borrowing  power  of   392 

Director,  stock  ownership  necessary  to  qualify  326 

Discount  at  highest  legal  rate  393 

Garnishment,  are  subject  to  340 

License  taxes,  not  subject  to  463 

Officers  not  punishable  under  State  laws  391 

Stock  in  State  banks  and  other  corporations,  cannot  own 391 

Taxation  of  deposits  in   464 

NEGOTIABLE  INSTRUMENTS. 

Collection  of,  general  rules  governing  liability 301 

Garnishment,  are  subject  to 341 

NONRESIDENT. 

Deceased,  stock  of,  transferred  how 452 

Indorser  of  note,  cannot  be  sued  in  same  action  with  resident 

maker : 396 

"NO  PROTEST." 
Slip: 

Attached,  though  paper  sent  protestable,  bank  not  liable  for 

failure  to  protest 423 

Detached,  draft  becomes  protestable  423 

Stamped  on  paper  billed  protestable,  should  be  protested 422 

NOTARY  PUBLIC. 

Attesting  paper,  not  necessary  to  state  when  commission  expires  233 
Employee  of  bank,  may  attest  paper  in  bank's  favor  unless  pe- 
cuniarily interested  232 

Stockholder,  protest  paper*  not  disqualified  to 429 

NOTES. 

Administrator  signing,  bound  personally,  but  estate  not  bound  . .  229 

Agent,  signed  by  one  as,  is  individual  undertaking  of  the  maker  228 

Bankruptcy,  waiver  of  right  to  go  into,  not  valid 234 

Bill  of  exchange  or  draft  payable  "with  exchange,"  negotiable  399 

Check,  given  in  payment  of,  not  paid  surety  not  released 402 

Collateral  security,  given  as,  renewal  of  debt  not  relieve  maker 

of  liability   297 

Contract  under  which  issued,  reference  to  in  face  of,  not  affect 

negotiability   397 

Demand  note,  no  one  can  be  a  bona  fide  holder  of 400 

Deposit : 

Right  of  bank  to  set-off,  note  payable  at •  •  •  •  •  441 

Series  of  notes,  bank  purchasing  may  set-off  against  437 

Unmatured,  value  of  clause  giving  bank  right  to  set-off  ....  439 

Holiday,  due  on,  payable  when 346 

Homestead,  waiving,  is  a  debt  dischargeable  in  bankruptcy 235 

Indorser : 

County  of  residence  of,  suit  cannot  be  brought  in  against 

make'r  and  indorser 396 

Suit  against,  without  joining  maker ' .'.". . '. . '.". . '.  352 


INDEX  TO  OPINIONS.  515 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
NOTES— continued. 

Insolvent  debtor,  bank  may  set-off  against  deposit  of  though 

notes  not  due  436 

Joint  makers  must  be  sued  together 395 

Judgment  notes,  unknown  in  Georgia 403 

Married  woman,  notes  of,  used  as  collateral,  valid  in  hands  of 

bona  fide  holder  . ". 380 

Matured,  bank  may  set-off  against  deposit  436 

Nonresident  indorser  cannot  be  sued  in  same  action  with  resi- 
dent maker    396  • 

Officer,  guaranteeing  notes  for  compensation 405 

Partial  payments,  debtor  not  entitled  to  interest  on,  when 404 

Place  of  payment,  stipulated,  liability  of  maker  and  indorsers  . .  401 

Promissory  notes,  holder  of  collateral,  is  purchaser  for  value  . .  295 

Purchase  money  notes,  good  as  collateral  401 

Renewal : 

Indefinite,  provision  for  renders  nonnegotiable   398 

Notes  appearing  on  face  to  be  on  negotiable 399 

Signature,  place  of  surety  on,  immaterial 404 

Stock  in  bank,  given  for,  collectible 403 

O. 
OFFICERS. 

Discount  paper  payable  to  themselves  cannot 330 

Loans,  authority  to  negotiate,  shown  how 368 

Note,  guarantee  of,  for  compensation  7 405 

Overdrafts,  liability  for   406 

Resignation,  notice  of  not  required  405 

ORDER  NOTIFY. 

Draft  paid,  bill  of  lading  delivered  for  shipment  on,  bank  must 
forward  money  received 333 

ORDINARY. 

License  tax,  State  bank  subject  to  and  must  register  with 365 

OVERDRAFTS. 

Officers,  liability  for  406 

OVER-PAYMENT. 

Made,  through  mistake  of  fact  can  be  recovered 281 

P. 

PAPERS. 

Employee  of  bank  may  attest,  in  bank's  favor,  unless  pecuniarily 

interested   

PARTIAL  PAYMENTS. 

Calculation  of  interest,  method  of 360 

Debtor  not  entitled  to  interest  on,  when 404 

PARTNERS. 

Husband  and  wife  may  be 351 


516  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
PARTNERSHIP. 

Deposits  of,  cannot  be  set-off  against  individual  debts  445 

Dissolution,  notice  of  necessary  to  relieve  members 408 

PASS  BOOK. 

Balancing,  equivalent  to  furnishing  statement  of  account 410 

Entries  in,  not  conclusive  against  bank 408 

Erroneously  credited  money  may  be  recovered  409 

Rules  of  saving  bank,  printed  in,  binding  on  depositor 410 

PAYMENT. 
Check : 

Bank  may  refuse  if  not  presented  by  bank  through  which 

made   payable    273 

Certified : 

After  business  hours  cannot  be  stopped 255 

Cannot  be  stopped   254 

Notice  to  payee,  not  stopped  by 254 

Drawee  bank,  by  final  as  against  "insufficient  funds" 270 

Drawer  may  stop 283 

Indorser  for  loan  cannot  stop 287 

Payee  cannot  stop  285 

Payee  notified  by  telephone  or  telegraph,  good,  drawer  may 

stop 255 

Stopped : 

Bank  pays  at  its  own  risk 284 

Holder  has  right  of  action  against  drawer  and  indorser      285 
When  raised : 

Drawer  negligent,  must  stand  loss   274 

Money  recoverable  from  person  receiving 274 

County  warrants,  order  of  312 

Deceased  depositor,  of  balance  to  heirs  of 322 

"PAY  TO  ANY  BANK  OR  BANKER." 

Indorsement  for  collection  only  353 

PEACHES: 

Mortgage  on  crop  of,  valid 319 

PENCIL. 

Check  written  in,  fraudulently  altered,  drawer  must  stand  loss  . .       275 
PLACE. 

Stipulated  in  note  for  payment  of,  liability  of  maker  and  in- 

dorsers  401 

PLEDGE. 

Stock,  transfer  of  before  judgment  valid  though  not  entered  . ..       451 
PLEDGEE. 
Stock : 

Dividends,  entitled  to  448 

Entitled  to  have  transferred  to  him  450 

Warehouse  receipts : 

Cotton  stored,  how  far  protected  against  liens 481 

Sell  property,  right  to  488 


INDEX  TO  OPINIONS.  517 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
POST  CARD  NOTICES. 

Maturity  of  paper,  mailable 411 

POST-DATED  CHECK. 

Certified,  not  paid  before  date  it  bears 278 

Paid,  right  of  bank  to  recover  on  279 

POWER  OF  ATTORNEY. 

Corporate  stock,  transfer  of,  should  be  accompanied  by 311 

POWER  OF  SALE. 

Death  of  maker  of  collateral  note,  not  revoke 411 

PREFERRED  STOCK. 

Definition  of 447 

PRINCIPAL. 

Deposit   in   name  of  agent,  liability  of : 

Bank  to    224 

For  overdraft  225 

PRIOR  INDORSEMENTS. 

Indorsement  warrants   353 

PROMISSORY  NOTES. 

See  Notes. 
PROTEST. 

Amount  involved  immaterial   417 

Bankruptcy  of  party  not  affect  434 

Branch  bank,  check  drawn  on,  presentment  of 428 

Certificate  of  deposit  not  protestable 416 

Check : 

Agent,  indorsed  by,  authority  not  shown,  authorized  418 

Forged,  not  required   419 

Payee,  not  indorsed  by,  not  protestable  417 

Payment  not 'refused,  bank  protesting  liable  for  fees  and 

damages    431 

Payment  stopped,  required  415 

Subject  to,  immediately  upon  legal  presentment  425 

Unsigned,  not  protestable   420 

Collateral  security,  paper  held  as,  protestable  before  principal 

debt  due 417 

County  warrants  not  protestable 412 

Dishonor,  notice  of,  mailed  when  429 

Fees : 

Check,  may  be  charged  to  account  of  drawer  of 430 

Notary  public,  presenting  before  due,  not  entitled  to 430 

General  discussion  of 412 

Liability  of  bank  for  failure  to 424 

Maturity  of  paper : 

Due  date  not  extended,  proper  time  for 426 

Not  protestable  after   424 

"No  protest" : 

Slip  attached,  though  paper  sent  protestable,  bank  not  liable 
for  failure  to   423 


518  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
PROTEST— continued. 

Slip  detached,  draft  subject  to  423 

Stamped  on  paper,  billed  protestable,  should  be  protested  . .  422 

Place  of  payment  not  stated,  presented  where 427 

Second,  on  second  presentation  of  paper,  unnecessary   427 

Sight  draft,  subject  to,  when 428 

Signature  of  check,  not  corresponding  with  authorized  signature, 

protest  safer   420 

Stockholder,  notary  public,  not  disqualified  to  protest  paper  . . .  429 

Sureties  not  relieved  by  failure  to 423 

Time,  presentment  for,  where  place  of  payment  not  stated  in 

paper    427 

Voucher  check,  receipt  not  signed,  not  protestable 421 

Waived : 

Cannot  be  after  negotiation    432 

Failure  to,  bank  not  liable  for  433 

May  be,  in  face  of  paper 432 

Waiver  of  demand  is  equivalent  to  waiver  of  432 

PROXY. 

Directors,  vote  by,  cannot 481 

PUBLIC  SERVICE  CORPORATIONS. 

Loans  to,   for  more  than  twelve  months,  railroad  commission 

must  approve    374 

PURCHASE  MONEY. 

Mortgage,  recorded,  holder  of,  can  subject  property  in  hands  of 

second  purchaser  385 

Notes,  good  as  collateral  401 

PURPOSE. 

Crop  mortgage,  advantages  of  reciting  for  what  given 321 

R. 
RAILROAD. 

Bill  of  lading,   delivering  order  notify  shipment  without  sur- 
render of,  liable  to  transferee 237 

RATE  OF  EXCHANGE. 

Not  fixed   334 

REAL  ESTATE. 

Taxation,  returned  in  county  where  located  for 459 

REAL  ESTATE  COMPANY. 

"Trust,"  can  use  word,  in  name  of 470 

"REASONABLE  TIME." 

Timber,  for  cutting  and  removing 468 

RE-DISCOUNT. 

Statements  of  bank  must  show  434 

REGISTRATION. 

Ordinary,  license  tax,  State  bank  subject  to  and  must  register 
with    .  365 


INDEX  TO  OPINIONS.  519 

[For  References  to  Statutes,  See  Separate  Index.] 
RENEWAL.  Page 

Mortgage,  renewal  of  original  note  not  affect 382 

Note: 

Indefinite  provision  for  renders  non-negotiable 398' 

Negotiable  though  appearing  on  face,  to  be  399 

Usury : 

Excessive  interest,  eliminated,  relieves  from  taint  of 473 

Loan  infected  with,  usurious  473 

RENT. 

Landlord's  lien  for : 

Indorsement  of  note  transfers  362 

Rank  of   434 

Record   of    435 

RESIDENCE. 

Mortgage  of  personalty,  does  not  have  to  be  re-recorded  on 

change  of  mortgagor's  residence  386 

RESIGNATION. 

Notice  of  officer's,  not  required  405 

RULES. 

Printed  in  savings  bank  pass  book,  binding  on  depositor 410 

S. 
SAFETY  DEPOSIT  BOXES. 

Garnishment,  contents  of,  subject  to 343 

Liability  of  bank  for  435 

SALE. 

Collateral : 

Public  or  private,  without  notice,  under  terms  of  agreement, 

valid  300 

Valid  if  terms  followed 300 

Personal  property,  will  not  divest  senior  liens 366 

SAVINGS  BANKS. 

Installment  loans  not  usurious  when  356 

Rules  in  pass  book  binding  on  depositor 410 

SCHOOL  WARRANTS. 

Teachers'  salaries,  valid  for 313 

SECURITIES. 

Bankruptcy,  given  for  advances  in  good  faith  not  preferences, 

although  within  four  months  of 234 

Collateral,  holder  for  value  is  purchaser 295 

SET-OFF. 

Bankruptcy,  note  of  depositor,  against  deposit,  bank  may 438 

Demand  note  against  proceeds  of,  check  payable  to  maker  of, 

bank    may    437 

Depositor : 
Deceased : 

Deposit  against  unmatured  note,  bank  cannot 439 

Matured  note,  against  deposit,  bank  may  438 

Note  of  insolvent  bank  against  deposit  with,  may  be 444 


520  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 

SET-OFF— continued. 
Deposits : 

Demand  and  time  with  insolvent  bank,  against  notes  due, 

depositor  may  444 

Executor  or  administrator  against  personal  debts  cannot  be      445 
Note: 

Bank's  right  to  set-off  when  payable  at 414 

Clause  giving  bank  right  to  set-off,  against  unmatured, 

value  of    : 439 

Indorser  or  guarantor,  bank  cannot  against  deposit 440 

Notes : 

Matured  notes  of  customer  against  deposit,  bank  may 436 

Series  of   notes  purchased,   bank  may  against   deposit   of 

maker  437 

Unmatured,  against  deposit  of  insolvent  debtor,  bank  may  .       436 

Partnership  deposit  cannot  be,  against  individual  debts   445 

Stockholder's  deposit  against : 

Statutory  liability  for  assessment,  cannot  be 447 

Stock  subscription,  cannot  be  446 

Surety  or  indorser,  failure  of  bank  to  set-off  deposit  of  maker, 

not  discharge    440 

SEVEN  PER  CENT. 

Discount  at,  or  more,  amount  reserved  not  exceeding  eight  per 

cent.,  not  usurious  though  not  in  writing  329 

SIGHT  DRAFT. 

Protestable,  when 428 

SIGNATURE. 

Check,  unlike  authorized  signature,  protest  safer  420 

Illiterate,  bank  may  require  witness  to  check 263 

Payee  of  certificate  of  deposit,  bank  must  know 250 

Place  of  surety  on  note,  immaterial 404 

SON. 

Minor,  deposit  of,  father  cannot  check  out  when  made  by 324 

SPECIAL  DEPOSITS. 

Checked  out  for  other  purposes,  may  be  324 

STATE  BANKS. 

National  banks  cannot  own  stock  in   391 

STATE  LAWS. 

Officers  of  national  banks,  not  punishable  under 391 

STATEMENT  OF  ACCOUNT. 

Balancing  pass  book  equivalent  to 410 

STOCK. 

Administrator  or  other  fiduciary  may  vote 449 

Note  given  for,  collectible  by  bank 403 

Director : 

Must  hold  in  his  own  right 326 

Sale  of,  not  relieve  of  liability  as  indorser  of  bank's  paper  . .       328 
Dividends  on: 

Held  as  collateral,  payable  to  pledgee  331 


INDEX  TO  OPINIONS.  521 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
STOCK— continued. 

Transferred  between  date  of  declaration  and  date  of  pay- 
ment, payable  to  whom  331 

Forged  certificate,  holder  of  acquires  no  rights  under  449 

Judgment : 

Pledge  before,  superior  to  451 

Transfer  before,  valid  against 451 

Lien  created  by  by-law  cannot  be  asserted  against  holder  with- 
out notice  243 

Minor,  father  'liable  for  assessment  on,  bought  in  name  of 381 

Mortgage,  corporate  stock  not  subject  to 387 

National  bank  director,  ownership  necessary  to  qualify  326 

Nonresident  deceased,  stock  transferred,  how  452 

Pledgee : 

Claim  inferior  to  mortgage  on  corporations  property    ...  389 

Dividends,  entitled  to    448 

Entitled  to  have  transferred  to  him  450 

Power  of  attorney  in  blank  transfer  authorized  450 

Preferred,  common,  and  watered,  definitions  of  447 

STOCK  CERTIFICATE. 

Lost,  established  how    376 

STOCKHOLDERS. 

Bank  holding  stock  liable  as  454 

Bankruptcy,  statutory  liability  is  debt  dischargeable  in 453 

Books  of  the  bank,  liability  of  those  whose  names  appear  on  ...  455 
Deposits  of : 

Assessment  for  statutory  liability,  cannot  set-off  against  . . .  447 

Stock  subscription,  cannot  set-off  against  446 

Dividends  payable  only  to,  or  his  legal  representatives 332 

List  of,  bank  not  required  to  furnish  to  stockholder 453 

Statutory  liability,  limitation  of  suits  for  455 

Taxation,  bank  must  make  return  of  shares  of  stock  for 461 

STOLEN  CHECKS. 

Signed,  amounts,  etc.,  fraudulently  filled  in,  drawer  not  liable  on  291 
STRANGER. 

Check  of,  worthless,  customer's  identification  not  make  liable  for  269 
SUIT. 

Transfer  of  property  after  filing,  valid  469 

SUNDAY. 

Legal  holiday,  falling  on 346 

Sale  of  collateral  advertised  in  Sunday  newspapers,  invalid  ...  301 

SUPPLIES. 

Landlord's  lien  for,  furnished  by  another 362 

SURETIES. 

Deposit  of  maker  of  note,  failure  of  bank  to  set-off  against,  not 

discharge  44° 


522  IND&X  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
SURETIES— continued. 

Extension,  consent  of,  necessary 457 

Married  woman  cannot  be  for  another  377 

Protest,  not  relieved  by  failure  to  423 

T. 
TAXATION. 

Bank  books,  production  of,  to  tax  officers  461 

Bills  receivable,  subject  to  467 

Corporation  tax,  State  banks  liable  for  462 

Liberty  Bonds  cannot  be  deducted  in  making  returns  for 460 

Money,  subj  ect  to   466 

Municipalities : 

Bonds,  cannot  tax  their  own  465 

Business  tax,  may  levy  on  State  banks  : 462 

National  banks : 

Deposits  in,  taxable   464 

License  taxes,  not  subject  to  463 

Real  estate  returned  in  county  where  located  459 

Returns  for,  how  made  457 

Stockholders,  bank  must  make  return  for 461 

TAXES. 

County  warrants,  whether  can  be  used  for  the  payment  of 314 

United  States,  checks  for  must  be  remitted  at  par 335 

TAX  FL  FAS. 

Lien  of,  duration  of  467 

TAX  RETURNS. 

Banks,  how  made   '    457 

TELEGRAM. 

Forged,  bank  wires  instruction  to  pay  on  authority  of,  must  pro- 
tect bank  paying 334 

TELEGRAPH. 
Check : 

Cannot  be  certified  by  251 

Payee  notified  by,  good,  drawer  may  stop  payment  of 255 

TELEPHONE. 
Check: 

Cannot  be  certified  by  251,253 

Payee  notified  by,  good,  drawer  may  stop  payment  of 255 

TENANT. 

Judgment  against,  levied  on  cotton,  warehouse  receipts  trans- 
ferred, rights  of  parties 486 

TIMBER. 

Cutting  and  removing,  "reasonable  time"  for   468 

TITLE  RETENTION  CONTRACT. 

Fixtures  sold  under,  vendor's  rights  protected  how  337 


INDEX  TO  OPINIONS.  523 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
TRANSFER  OF  CORPORATE  STOCK. 

Not  affected  by  judgment  against  vendor  310 

Should  be  accompanied  by  power  of  attorney  311 

TRANSFEREE. 

Warehouse  receipts  for  cotton  stored,  how  far  protected  against 

liens    481 

TRANSFER  PENDING  SUIT. 

Valid 469 

TRUST   COMPANY. 

Bonds,  ordinary  negotiable,  cannot  issue 470 

"Trust,"  real  estate  company  can  use  in  name , .      470 

TWO  NAMES. 

Deposits  in,  payable,  how  325 

U. 
USURY. 

Balances,  interest  rate  based  on,  as  a  general  requirement,  not 

usurious    475 

Bona  fide  holder,  can  be  pleaded  against rf 477 

Commissions  paid,  when  constituting  476 

Debtor,  may  recover  amount  paid,  when  477 

Deposit,  eight  per  cent,  loan  constitutes,  portion  to  be  kept  with 

lender  as    475 

Discount,  note  of  third  party,  at  more  than  lawful  rate 478 

Indorser  of  homestead  waiver  note,  not  relieved  by 472 

Interest,  deducting  in  advance,  is  478 

Knowledge  of,  stated  in  face  of  paper,  immaterial  472 

Penalty  for   -. 471 

Renewal : 

Act  of  1916,  new  law  governs  since 474 

Interest,  excessive  eliminated,  relieves  from  taint  of 473 

Loan  infected  with,  usurious  473 

Third  party,  loan  made  at  lawful  rate,  to  pay  usurious  debt  to, 

not  usurious 474 

V. 
VENDOR  OF  LAND. 

Bond  for  title  given,  possession  recovered  how  when  vendee  de- 
faults in  payment   240 

Rights  of,  upon  default  of  vendee  holding  bond  for  title 238 

VOLUNTARY  DEED. 

Consideration,    nominal,   and   love   and   affection,    intention   of 
parties   governs    48° 

Void  as  against  purchaser  without  notice,  though  recorded  . . .       480 
VOTING  BY  PROXY. 

Directors  cannot    481 

VOUCHER  CHECK. 

Protest,  receipt  not  signed,  not  subject  to 421 


524  INDEX  TO  OPINIONS. 

[For  References  to  Statutes,  See  Separate  Index.] 

Page 
W. 
WAIVER. 

Homestead,  invalid  where  already  existing 350 

Protest,  bank  not  liable  for  failure  to  433 

WAREHOUSE  RECEIPTS. 

"Customary  charges  and  advances,"  includes  what  487 

Liens,  transferee  or  pledgee  of  cotton  stored,  how  far  protected 
against   481 

Pledgee,  right  of,  to  sell  property   488 

Tenant,  judgment  against,  levied  on  cotton,  rights  of  parties  . . .      486 
WATERED  STOCK. 

Definition  of  447 

WIFE. 

Certificate  of  deposit,  issued  to  husband,  payable  to  in  event  of 
death,  must  be  paid  to  administrator 248 

Husband's  deed  of  gift  to,  recorded,  void  as  against  purchaser 
without  notice  480 

Insurance  policy,  witnessing  transfer  of,  is  estopped  from  claim- 
ing proceeds  under  357 

Property  of,  pledged  by  husband  as  collateral,  pledgee  without 

notice  protected 295 

"WITH  EXCHANGE." 

Bill  of  exchange  draft,  or  note  so  payable  is  negotiable 399 

Y. 
YEAR. 

Loans,  power  of  officers  of  bank  to  make,  extends  for  one 367 

YEAR'S  SUPPORT. 

Collateral  pledged,  superior  to  claim  of  creditor  on 489 

Deed  to  secure  debt,  superior  to 489 

Mortgage  creditor,  superior  to  claim  of  489 


A     000  696  447     2 


